Can the Economy Withstand Higher Interest Rates?

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After the Recession

Due to the collapse of the United States housing bubble and the subprime mortgage crisis that led to a recession in the US from December 2007 to June 2008, the entire financial market has had to adjust. As a result of this global financial crisis, over the past several years interest rates have been at an all time low. Creditors have made allowances for people that they wouldn’t make under normal circumstances and because of all of this America is on the road to a somewhat manufactured recovery.

Federal Reserve Steps In

Lower interest rates from the Federal Reserve reduces the cost of capital. The Federal Reserve has managed to stimulate the economy by keeping interest rates low. Theoretically, companies are able to borrow money at lower rates. This means they can use the money for expansion, buying new equipment or inventory, and hiring more employees.

Consumption is one of the main economic drivers in America. Right now, the average family should be able to enjoy a lower interest payment when purchasing a car or home. Theoretically, this should be stimulating the economy but it’s not. Millions of Americans are living paycheck to paycheck and another portion of Americans don’t qualify because their credit was injured when the mortgage crisis hit.

Stock Prices

Generally speaking, stock prices have been on the rise. The DJIA and NASDAQ have been hitting all time highs. One could argue that this is due (at least in part) to the Federal Reserve keeping interest rates low. However, stock prices are not always a true reflection of how well a particular economy is doing. The health of any economy should be measured by other metrics  such as unemployment numbers, consumer confidence, minimum wage, GDP, and other statistics. One could argue that the USA is just barely hanging on.

Raise the Rates?

Due to the fact that the economy has high unemployment, minimum wage is not going up, and consumer confidence is down, the US economy is not that healthy in many American’s eyes. Raising the interest rates now would drastically slow down the economy. Companies would not have access to affordable capital and wouldn’t be expanding, hiring, or engaging in practices that stimulate economic growth. In addition, American families are still struggling and unable to access many of the benefits of the low interest rates. Raising the rates would cause these families and businesses to struggle even more.

The Facts

Is interest rate suppression an actual cause or catalyst of higher stock prices? Low interest rates are not the only reason stock prices have risen. They are higher because many companies are buying back their stocks, limiting the float, and are downsizing employees. They are artificially meeting wall street estimates. This method is not sustainable. Higher interest rates could easily cause a correction in the market and have a negative trickle down effect on the US economy.

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Surging Gold Demand

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There have been reports in the mainstream media on the apparent decrease in the demand for gold due to low prices. However, the prices seem artificial and it is unlikely they will remain for long as the global demand remains strong. With time they will rise as supply becomes lower than the demand. Continue reading our market analysis

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Puerto Rico – Financial Bane of the USA

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Puerto Rico the U.S. Territory

Puerto Rico is an island in the Caribbean Sea that is also a largely self-governing territory of the United States. Politically it does not have much power since its citizens cannot vote or elect someone to the senate. Puerto Rico only sends delegates who cannot vote on legislation except during committee meetings. One cannot rule out the evidence of politics at play in the crisisContinue reading our market analysis

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Why Gold or Silver Makes Sense in a Self Directed IRA

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Self directed IRA’s are becoming more popular as people strain for greater control and a wider variety of choices that are typically not offered in traditional brokerage firms. They are simple and flexible investment vehicles that allow one to create lasting wealth by investing in areas where they have knowledge, expertise and comfort. One of these investments is a Precious Metals IRAContinue reading our market analysis

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Critical Skills For Life Planning

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In today’s economy, the future is more uncertain than it’s ever been before. The political situations around the world are reaching breaking points like the world has never experienced. The financial crises are coming more often and more unexpectedly. Many citizens who don’t stay current on financial news were taken by surprise when Greece reached its breaking point. Then China’s economic meltdown followed quickly behind Greece. The reason that so many people were taken by surprise is that people today lack the critical skills for life planning. Continue reading our market analysis

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What Is Going On With the Shanghai Stock Market?

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The current situation developing in the Shanghai stock market is uncomfortably similar to the American financial meltdown that occurred just seven years ago. China’s stock market is currently in a bad tailspin. In the past week, the benchmark Shanghai Composite Index was down 30 percent from its June peak. The huge losses amount to roughly $3 trillion. Many people in China and around the globe are panicking and wondering what the ultimate economic impact will be. Continue reading our market analysis

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The Greek Crisis

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In 2001, Greece adopted the euro has a form of currency and joined the Eurozone. Marred in debt, the Greek government used this opportunity to secure billions of dollars in loans. The influx of cash was properly managed and used to try and modernize the country on par with its European neighbors. In 2004, the Greek capital played host to the Olympic Games at a cost of nine billion euros. Compared to the economic output of the country, the cost of the Olympic Games represented roughly five percent of Greece’s yearly gross domestic product. Problems were further compounded by inaccurate reports regarding the financial health of the country by financial officials, who ignored down played the nation’s plunging deficit for some time. The nation had no buffer or security net to fall back on when the United States went into a period of recession. The lack of exported goods coming out of the country and hits to the tourism sector made the severity of the nation’s financial woes very apparent to other Eurozone countries. The crisis facing Greece has left many people around the world concerned, and rightfully so. Continue reading our market analysis

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History of the United States Mint

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The United States Mint is responsible for producing and circulating all coinage for use in economic trade or commerce. However, few are actually aware of the history behind this financial intuition. In the beginning of America’s days as a colony, each state produced its own currency or accepted foreign coins as a means of payment. Massachusetts was the first of the colonies to produce a paper currency, which later gave rise to Continental Currency in an effort to finance the Revolutionary War. However, these paper notes had no solid backing of any kind other than predicted taxes revenue collected from each colony. In 1781, The Continental Congress sought to increase confidence in its currency through the establishment of The Bank of North America in Philadelphia, which was then the capital. The printing of money was left to private banks who printed notes of all kinds. As a result, paper notes and coins were easily counterfeited. Silver bullion coins were easily pressed and engaged with images and the exchange rate varied throughout each colony. Continue reading our market analysis

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Nixon and the Gold Standard

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The Gold Standard

The United States had been under the gold standard from 1879-1933. Following the bank failures of the Great Depression in the 1930’s and the stock market crash of 1929, President Roosevelt enacted the Gold Reserve Act of 1934. As the US was still facing the the after effects of the economic turmoil, this act attempted to counter these effects by confiscating the majority of gold owned by Americans in the 1930’s in return for paper money.

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Gold is Great but Silver is Special

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Like two wings of a bird the discerning investor needs both to soar.

History of Gold and Silver

When it comes to investing, precious metals investments really are a no-brainer. Precious metals are respected no matter what part of this world you are in. Gold has been used as a form of payment for thousands of years and has always been desired and sought after. The earliest known example of gold in a coin is around 800 B.C. 300 years later, they were striking pure gold coins during the time King Croesus reigned over Lydia. There are much earlier examples of people making precious and treasured items out of gold, as early as 3,000 B.C. Continue reading our market analysis

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