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I hate it when US economy has bad news.

Just read this in The Edge Malaysia. I hate it when there are bad news for the US economy. Come on, grow and maintain the growth! Latest jobs data for September showed that the numbers are far short of expectations and with this comes the potential delay of an interest rate hike. Federal Reserve is unlikely to risk raising rates and putting a stop to the current fragile growth. I seriously hope every month, they would report very good numbers for the US economy and the rates are increased on schedule in the soonest possible time. Read here for my wish for the US economy: I also hope US economy will show great numbers  Otherwise, lots more volatility and uncertainty for all the smaller economies which unfortunately includes Malaysia.
In brief, when economy is growing, the rates can be increased. This gives the central bank, in this case the Federal Reserve to have more flexibility to deal with any other shocks. Imagine if your interest rate is already zero. What else can you do when you want to simulate the economic growth? Nothing. Perhaps the government can continue to borrow ever more money and pump into the economy? Well, it may not work. Japan’s current government debt to GDP is already 230% as at Dec 2014. The country which defaulted recently, Greece is at 177% while US is at 102.8%. Oh yeah, our country Malaysia? It’s at 52.8%. Remember Zeti said that our rates are currently accommodative? Yeah, we can still use interest rate as a ‘weapon’ to help in GDP growth. Many countries could not because their rates are already zero or close to zero.
Last week, the Fed Chair Janet Yellen’s said that the US economy was strong enough to withstand a rate hike this year. Economists say that the United States should be put on a path of higher interest rates because this may give the Fed more ammunition to deal with any future recession. Interest rates should be too high but the current rates in US is only 0.25 percent. Now do you understand why everyone is so excited with the interest rate movement in US? The only way is UP. That’s why majority of everyone is definitely going to hold more US$. It’s considered safe since the rates in US has been mentioned countless times as “most likely” to go up since some time back. All the best US. Grow!
written on 2 Sept 2015
Next suggested article: Interest rates “accommodative” and single currency thought

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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0 Responses

  1. Actually we all don’t know what the US are doing by holding their interest rates. Maybe it’s just another strategy for them to bring up USD. Now they can buy cheap from the world to stimulate their economy.
    You can see the Yellen’s strategy is different from Bernanke. When the internal economy runs well then she will put up a strategy to devalue USD so that the world can buy more goods from USA. We can see Yellen keeps on telling that the interest rate is going up but yet keeps on holding. It’s weird because she knows the USD had appreciated so much and she seems to like it. Now she said that the interest rate will be revise by early next year. This statement is just like to call the money back and pushing up USD further more.
    Last three month we didn’t believe the USD will touch 4.00 against RM. Now can we afford to believe USD will not touch 5.00? I am not speculating but think independently. I also do not like it to happen and am not buying USD but what if it happens. It’s not so far now my friend. That’s why our petrol still stay the same price like two years ago.

    1. Hey, this is a new thought. No wonder I always think a lady is a much better bank governor than a guy. Agree that this may be another way for US to keep its currency strong and ‘gobbling’ up more of the weaker ones. As for it reaching RM5 to US$1, I can only say I wish it would not. After all, I seriously do not think we can do much if that’s really what the whole market thinks, including Malaysians.

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