經濟,財務,統計學,數理科學與政治評論

  Let us consider the Fed fund rate raising or not again.

  Mrs. Yellen already declares the Fed will eventually raise rate this year. To increase rate sooner rather than later means the Fed could fine tune its monetary policy thereafter. But if the Fed does not raise rate this September, it means that the Fed has to raise rate later. There are only TWO times left this year. The uncertainty will be largely reduced rather than increased because the Fed leaves less choice on the table as the time is limited. According to the experience of Sweden which implements the negative rate policy, people have to sacrifice their principal money when saving in the bank, their house prices go up more than 10 percent during the time. People will try to find something else to preserve their purchasing power, so the money goes to property. On the same reasoning, it means that to prolong too lower interest rate policy a longer time may trigger unexpected higher property price in the USA. Of course, Mr. Trump may get even richer just as his own claims on the spotlight. But it may hurt the dream of ordinary American people who wants to have a shelter.

  The late triggering of the rate may have some impact for the rest of the world. It may let the greeback to appreciate even more and make the US Treasuries even worthy. The yield rate of US Treasuries may go even lower which push other yields of fixed income securities go lower. If the claim sustains, the Fed should raise rate slower and later because of a strong US dollar policy. But we do not see that happening because other nations are forced to liquidate their US Treasuries or other US dollar-dominated assets to curb their own currency depreciations. The 40% US Treasuries are owned by non-American or other nations. If the US dollar appreciates even more during the time where Fed are not eager to raise rate, then the yield of US Treasuries may not get lower but higher when other nations try hard to protect their currencies by selling US dollars. The bright side is those countries will largely trim down their US dollar-dominated foreign reserves. The dark side is the American financial agents will have to buy even more US Treasuries in the time where the Fed still waits and sees. Of course, it breeds other question that many foreigners may be eager to hold US Treasuries to conterbalance the US Treasuries selling of some foreign sovereigns as their home currencies depreciate a lot. In the end, the yield of US Treasuries goes up or down depends on the reward of stock markets or other alternative investments. If the uncertainty remains, stock markets may go down and alternative investments go sour, then the yield of US Treasuries will go south rather than north. It may be a good thing for US citizens who own US property and try to pay down mortgage. But it definitely hurts the people who live upon stock market or other alternative investment.

  The history tells us that, during the Fed raises rate, the most hurting people are investment bankers. I think this time is no difference. The Fed raises rate means the US economy has more strength to deal with other financial shocks because the Fed has some measures to fine tune the rate. The more rate raising the Fed does, the more tools the Fed has for the rainy day. People all around the world already prices in the Fed's rate raising in the US Treasuries. If Fed leaves the rate on hold this time, it means that people have to lower the yield of US Treasurires again. It may bring more US dollar back home of US land because the uncertainty remains. It may be a good news for those people want the greeback go home. But it creates other uncertain moments for the rest of the world again. People do expect the day after Fed rasing rate, the market calms down and the investment booms again. Then we may have a merried Christmas. Or we may have to guess again until the Fed raises rate this year eventually.

  For better or worse, the first Fed Fund rate raising of USA does not hurt the US much. It is a well expected thing. But it means quite lots to the rest of the world. Because all other stock markets and alternative investors have to accomodate the Fed's monetary policy accordingly. It may trigger some enormous costs to the rest of the world.

  To raise or not to raise seems not to be a big headache for the Fed ONLY.