If the American economy is doing so well, why did FED suddenly become so mild in its rhetoric during the last session? At the previous meeting in March, none of the FOMC Committee members was willing to lower interest rates, now there are 7 members who want to pump cheap money into the market. Perhaps it was the reaction to Draghi’s speech in Vilnius, in which the ECB chief announced further bond purchases and stated that he “will use all possible means” to boost the European economy before his term ends in autumn.
It looks like currency wars will continue and the central banks will continue to compete with each other in easing their policies. The markets are happy about this, and stock prices in the USA are setting new records. For European citizens, Draghis’ announcement is rather a threat to their savings. If the ECB introduces the negative interest rate, the sums on their accounts will slowly but surely melt. We have warned about this several times.Data from the retail trade and from orders in industry show that American citizens are not doing so well either. Even in April, i.e. before the new steps Trumps in the trade war, they performed very weakly. Why is that? Unemployment is at its lowest level for 50 years, inflation is low and American companies paid record dividends in the first quarter. Nevertheless, consumers are not willing to spend much. It is because, despite full employment, wages are not raised. Another factor is the huge indebtedness of Americans. An example: only the debts made with credit cards amount to 1 trillion dollars! The point is: the interest rate on loans in the USA remains low, but the interest rate on credit cards is growing and currently averages 17% annually. This means that Americans have to pay 170 billion dollars in interest every year!
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