FEDERAL RESERVE RAISES INTEREST RATE

EDITORIAL By Dhiren Shah

Hello Readers,

The Federal Reserve has realized the importance of controlling inflation and raised interest rates 3/4% (.75%) to help that effort. Now, the Fed rates are between 1.5% to 1.75%. This is a transaction between the banks and that will impact our interest, including mortgage rates. In 1994 under the Clinton administration, Alan Greenspan raised interest by 3/4% when the inflation rate was 2.56% versus the current inflation rate of 8.6%. The more inflation there is, the more a recession is definite.

We saw the last full-on recession after the real estate crash in 2008-2009. Suddenly, the real estate market dropped drastically. Alan Greenspan had something to do with it. He allowed the investors to give loans over the market price. Some of the investors were giving 125% loan over the market value in 2006. All of a sudden, foreclosures and bankruptcies were on the rise and most of us felt the pain of the recession in 2008 and 2009.

The pandemic has affected the economy as well but giving out and distributing money by printing bills to promote popularity is hurting us. PPP loans were the only successful program until today. They gave the first PPP loans to large corporations, which was a mistake and was corrected in the second round of PPP loans. It was good, but not enough for many smaller businesses. Also, the Federal Pandemic Unemployment Compensation program (FPUC) gave an additional $300 per week and after June 2021, $600 per week for 13 weeks, which boosted inflation as well. Jerome Powell, the current federal reserve chairman has to say no to the president, rather than printing bills and letting inflation go sky high.

Hardship continued with the rise of gas prices. Oil shortages have been created by politics and the most benefits went to middle eastern countries. Stopping Russian oil and gas did not help us. The demand for the oil and gas was diverted from Russia to other countries. America used to be self-dependent for oil in the last few years. Self-dependent meaning the exports should be more than imports for the similar products. Under Trump, it was self-dependent. Under the Biden administration, export are still more than the imports. So why are we screaming?

I understand the people’s outburst. Gas prices over $5, grocery prices on the rise, travel costs are rising. It is getting harder to live comfortably for the majority of the working middle class and working poor class. The government is controlled by our elected officials, who make sure that when the government needs money, they collect directly or indirectly from the people. Raising sales taxes, raising property taxes, raising fines, raising income taxes, and many indirect ways of collecting money. I haven’t seen the reduction of taxes in most of the items. When there is a public outcry for something, they will reduce taxes on one and raise another to compensate their budget.

We need to overhaul our system. If any law was made, but not used for five years, that must be rescinded. I have not seen any elected leader suggest starting a rescind department or appoint one person, who can do search for laws not used in five years. Then prepare the resolution for the council or house of congress to rescind the law. That way, it does not go against any person when they do need it.

In Orange, there was a law passed approximately in 1994 to have a key box outside of any shop. There was a protest by businesses and the chamber of commerce. They have not acted upon it and let it go. After about eight years, then Mayor Mims Hackett circulated a letter to implement the law which is on the books already. After eight years, it is harder to get together all the businesses, so with the dissatisfaction of the businesses, it was implemented. Also, in that law it was not clear who pays for it, the landlord or the tenant. For the city purpose, the landlord has to give the money to the city and many landlords collected from the tenants as per my knowledge. So, if the law is not useful it should be deleted from the books to protect the citizens and businesses as well. 

Have a wonderful week.

I’ll talk to you next week.

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