Interest Rates Should Be Higher, Not Lower
Peter Schiff

Along with Trump, market watchers are salivating for rate cuts. But rates should be higher, not lower—and in a free market, they would be. 

In a free market, interest rates are determined by the supply and demand for credit. Savers provide capital (supply) while borrowers like businesses, consumers, and governments create demand. Rates would reflect the real cost of capital. They would balance risk, inflation expectations, and real economic conditions.

Instead, we trust a small handful of individuals with full implied mastery of an infinitely complex system with endless interdependent factors that even they admit they don’t fully understand. It’s absolute madness when this same system, left to its own devices, would self-correct on its own if we allowed it to. In that self-correcting system, rates would be drastically higher than they are now.

All central planning does is distort markets by trying to override the natural order in favor of the preferred reality of bankers, bureaucrats, politicians, and academics. While you can achieve a brief illusion of success, you can’t do that forever. Meanwhile, most people have too little understanding of the dynamics, and too short an attention span to realize what’s actually happening. That includes politicians.

The prevailing popular sentiment always seems to be that we can just make the economy great by declaring lower interest rates and printing money, and that monetary easing is both necessary and inevitable. But while investors focus on short-term gains, the underlying conditions almost never support rate cuts in today’s economy.

Real interest rates are still low by historical standards, and the federal government continues to run huge fiscal deficits. Inflation is still a problem and consumer prices are going to keep going up. Lowering rates even more will make those problems worse.

As Peter Schiff said recently on...(READ THIS FULL ARTICLE, 100% FREE, HERE). 

 

Peter Schiff is Chairman of SchiffGold, CEO and Chief Global Strategist of Euro Pacific Capital, Inc, and host of The Peter Schiff Show. Peter is an economic forecaster and investment advisor influenced by the free-market Austrian School of economics. He is one of the few forecasters who accurately and publicly predicted the 2007 housing market collapse and subsequent 2008 financial crisis. His latest best-selling book, The Real Crash: America’s Coming Bankruptcy – How to Save Yourself and Your Country, warns that the 2008 crisis was just the prelude to a larger sovereign debt crisis in the United States that may lead to a collapse of the US dollar. Peter recommends long-term investment in foreign markets with sound fiscal policies, as well as global commodities including buying gold, silver and other physical precious metals.

 

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