Recently, the US economy climbed to a decade high rate
of growth of 5% which has reinforced the expectation that the recovery, that
began 5 years ago, has now reached a level where we can steer the economy at a
high-speed in order to achieve the goals the policy-makers have set for
themselves and have borrowed heavily from the future, actually the debt will be
paid by the next-generation... Nevertheless, debt (i think) should not be
rolled-over to the Gen-X because that will be a burden on their resources... Atleast,
this looks rational... Why somebody would pay for your excesses? At first glance
it does not look wise... Any ways, all – savings, investment &
interest-rates – have a high effect on the growth-rate... Low interest-rate has
a good-effect on growth-rate, unless we are in liquidity-trap... A commitment to
keep interest-rate low for a long-time should be good for investment and
growth-rate, unless.... The Fed decision to increase key rates somewhere in the
middle of 2015 should be based on the investment figures (rate of change)...
what a central-bank normally does... It takes gauge of inflation and the rate
of investment to decide for a rate-hike... And, sometimes when investment (read
also employment) is low the bank may decide to tolerate high inflation... This is
what the Fed intended to do since Recession-2008... But... (there is a big-one)...
why the Fed is not taking in to account
the rate of change in savings and investment, and try to equate them with the
US’ potential growth-rate, the rate of change in population, near 10% (decadal)...
To achieve this potential growth-rate the US-economy must grow 10%
every-year... Therefore, savings and investment must also grow 10%
every-year... This is too early to even think of a rate-hike... The economy is
just growing half of its long-run potential...
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