經濟,財務,統計學,數理科學與政治評論

Dear American people:

 There is a suggestion that US Fed should raise the Fed fund rate sooner than later, then we may expect the US dollar appreciate quite a lot. The reason is due to the disappearance of short term arbirtrage or rent seeking activities. It may cause the drop of carry trade and short term wasteful consumption borrowing of US people. But a serious question arises to the US society which may lose its ability to borrow and consume. We all know that US domestic economy depends heavily on the consumption of durable goods such as car sales or house sales. This kind of borrowing should be the long term borrowing, but it is not lately when people use the short term loan to pay for it. If the borrower do not qualify to be a legitimate long term borrower, then the only way they can borrow is through the short term borrowing channel. It is the reason why the Fed Fund rate raising may casue a big trouble to those not-in-such-a-good-shaped ordinary American people. We all know that US domestic economy does depend on US people borrowing a lot of money for the higher education such as master degree or professional certification. We all know that those activities are largely counted on  the short term borrowing or refinancing of original debts lately. So if the US economy is still lousy and the US people still live on their part time job payrolls rather than a legitimate full time job. We should not expect the short term Fed fund rate to be raised too soon. It may hurt a lot of Americans.

  On the other hand, we also need to notice the dark side where the short term Fed rate is not riased as soon as possible. The signal effect may show the opposite. People may lose their confidence on the economy just as Japan when the rate can not be raised as soon as possible. And too loose Fed fund rate may induce information assymetric effect which make people borrow more and pay less. A little strigent short term rate may let people fully aware that they should do more to improve their own lives. Ordinary American people should not just rely on the government subsidy. It is not a proper way to live on this life like forever. But those things are based on the job market improvement and better US domestic economy. If American people can not find a decent job, how could we expect they pay down their debts and save more? If American people can not have a peaceful mind, how could they concentrate on their debt situation improving rather than just in a situation of faith losing? There is a balance that the US Fed authority should consider. It is the first and the foremost priority that the US Fed should figure out seriously these days.

  It should be mentioned again that the relation between the long term rate of Treasuries (the yield) and the short-term Fed fund rate should be considered separately when the economy is lousy but should be considered coherently when the thing gets better. The accumulation effect of short term rate should have its impact on the long term rate.