Ive been waiting for the Fed to raise interest rates for awhile now, but you say theyre not going to raise rates by any more than a marginal amount. Why is this and what can I invest in instead?
They just cant. Raising interest rates means raising their interest rate payments. They implemented a zero interest rate policy (ZERP) because they cant afford this additional burden. Raising rates back to historical norms of 5% would occupy a third of the U.S. budget about $1 trillion. Raising them even 1% is an annual expenditure of $176 million, and theyre talking about getting rates back to 2% by the end of 2015. When you look at this in conjunction with our national debt $17.6 trillion, and about $130 trillion in unfunded liabilities and future payments suddenly the idea of raising rates by any significant degree seems not only impractical, but impossible. There are still opportunities to generate income particularly through owning dividend-paying stocks and a strategy known as put selling which one of our editors, Chad Shoop, reveals in his service Pure Income.