經濟,財務,統計學,數理科學與政治評論

Dear American people:

  To be honest, it is a tough issue. To be honest, I do not think anyone in the world could have an answer make everyone happy. Let's see some possible consequences.

  First of all, everyone woories about the short term rate raised could have impact on the long ter rate. Here the long term rate means the yield rate of 10 years treasures. Many people have mortgage to pay. And their mortgage rates depends largely on the yield of 10 years Treasuries instead of Fed short term rate. But we often see the long term event is an accumulation process of short term things. So people may worry about the short term rate has big impact on the long term.

  Second, we have to figure out how many American people live on the events of short term rate. The short term rate may have another big impact of other borrowings, such as credit card, debit card or other short term loans. We have to figure out of the effect when those borrowings become expensive. We have to understand the household borrowings and household monetary cycle when they face the raising of Fed's short term rate. If there is a big impact, then we may understand the fact that a lot of American people live in  a life largely depends on the short term borrowing. And the fact shows how vulnerable of ordinary American people and the Fed should not raise short term rate now but tries hard to improve the life quality of ordinary American people, especially their financial situations.

  Third, we may face another issue is the substitution effect of world curreucies. If the Fed riases the short term rate, the borrowing cost of US dollar will be increased. The carry trade may stop. Of course, we see the US dollar become stronger lately. It already have the effect on the carry trade of US dollar borrowing. If the US dollar becomes weaker again. Then the short term rate rising may have its impact on the value of US dollar when people borrow the US dollar for the trading events. Personally, I believe the weaker US dollar in the best interest of American people because the Us has pile uo too much debt. But the issue depends on the export relation with the weaker US dollar. If the weaker US dollar can improve the export of American-made products to the world, then the weaker US dollar is good to ordinary American people. If it is not, people arould the world will want to have a stronger US dollar. But I still disagree with that opinion becasue the USA has too much debt. 17 trillion debt is not an easy task. Every president of the United States will have to face this big challenge in their governing lifes. So if the US dollar follows a weaker trend, then the cost of carry trade will largely depends on the rising of Fed fund rate.

  American people may finally realize that the short term Fed fund rate rising may not have big impact on ordinary American people if a larger portion of American people have no short term debts. But if Ameican people still live on the recycling of short term debt financing, then the Fed fund rate may not to raise the Fedn fund rate too soon until a lot of American people fix their financial balance sheets. Of course, we need to educate American people how to live on their own savings rather than short term borrowing anymore. The goal Fed should keep in mind is to let American  people have much less debts and more savings. If the situaiton gets better, then the short term Fed fund rate rising has little impact on the long term yield of 10 years Treasuries. It is another story of how to grow the US.