"The Fed is aggressively raising interest rates, although inflation is contained, private debt is already at 150% of GDP, and rising variable rates could push borrowers into insolvency. So what is driving the Fed's push to 'tighten' "?
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LIBOR (the London Interbank Offered Rate) has risen even faster than the fed funds rate, up to 2.3% from just 0.3% 2-1/2 years ago and the interest on $3.5 trillion globally is linked to it, including $1.2 trillion in consumer mortgages.
Gobal debt levels have reached $233 trillion, more than three times global GDP; and that much of that debt is at variable rates. In its Global Financial Stability report in April 2017, the International Monetary Fund warned that projected interest rises could throw 22% of US corporations into default.
US federal debt, which has more than doubled since the 2008 to over $21 trillion in April 2018. Adding to that debt burden.
Fed will be dumping its government bonds acquired through quantitative easing at the rate of $600 billion annually. It will sell $2.7 trillion in federal securities at the rate of $50 billion monthly beginning in October.
Along with a government budget deficit of $1.2 trillion, that's nearly $2 trillion in new government debt that will need financing annually.
US taxpayers could owe $1 trillion annually just in interest on the federal debt. That is enough to fund President Trump's original trillion dollar infrastructure plan every year. Where will this money come from? Possible sources include taxes, privatization of public assets, and lowering of elimination of social servicesl.
With so much at stake, why is the Fed increasing interest rates and adding to government debt levels? Its proffered justifications don't pass the smell test.