For once I agree with the broken clock Peter Schiff: Peter Schiff: “The Fed Won’t Raise Rates, It’s Part of the Bluff”
The human bullhorn is right. All this speculation about a rite hike is just that – speculation. The fed isn’t going to do anything until the very, very end, when it’s so obvious rates must go up that when they do raise them no one, including the market, will be surprised. But right now, there is no pressing need to raise rates, and there are many reasons for rates to remain at zero, such as:
- The recent stock market plunge
- Concern over China
- Historically low CPI (although some items like tuition, insurance, rent, and healthcare have outpaced inflation, in what is called bifurcated inflation)
- Perpetually crappy labor market. Unless you’re really smart and in STEM, youre job will suck, that is assuming you can even find one. As everyone knows, including the fed, low unemployment doesn’t take into account the millions of people who dropped out of the labor force since 2008 and have little prospect of reentering.
Although the US population is growing briskly, the labor force has stagnated:
The ‘new normal’ is the low-paying service sector for anyone who isn’t in the top 20% of IQ, sorry to say.
Construction and manufacturing, which tend to be good-paying jobs for a wide range IQ levels, are becoming more scarce, replaced by the lower-paying service and healthcare sectors.
- stagnant wages since 2008:
However, in spite of the hollowing out of the middle an the un-participatory nature of the post-2008 economy, I’m still bullish on stocks and the US economy, since, in accordance to the Pareto principle, the top 20% (the cognitive and financial elite) are compensating for any weakness in the middle, along with strong overseas growth and the booming foreign middle class. In an economy that otherwise feels stagnant, high-IQ tech like Google and Facebook and intellectual property exporters like Disney is where the growth is. Because of this, stocks, consumer spending, and profits & earnings will keep rising even if many people are left out.