The Fed Chief Ben Bernanke this week (7/21/10) told the US Congress not to reduce stimulus spending. He emphasized how this was still vital to the shaky economic recovery. This is a huge sign in a global economic environment where other countries’ governments are trying scale back spending. You should take a look at your investment strategy and make any adjustments accordingly.
The global economy is getting back on it’s feet. You wouldn’t know it if you are in the US, but the rest of the world is on track toward stability and growth. As a result, those central banks are ushering policies that include austerity measures and even raising interest rates.
The US central bank, the Federal Reserve, is at least a couple of years away from interest rate hikes. They are still looking at staggering unemployment and a business community that is still reluctant to hire. To sweeten the pot, Bernanke is fighting for cheap credit to grease small business lending to get it going again.
We don’t know yet that the US Fed will cut rates again for fear of deflation. But in any case, they won’t hike it for a while until the economy gets back on it’s feet. The investor community is still nervous and a rate hike would send them running.
That’s a stark contrast to countries like Canada which in recent months raise their interest rates. Them raising interest rate is an indicator that they believe their economy is back on it’s feet, and it it is indeed.
They are also among the many nations advocating for austerity measures. They are trying to cut government stimulus spending and their budget deficits. They don’t want to become the next Greece, Spain or Portugal. The fact that we are still trying to encourage stimulus spending by the government shows that the economic leaders of the US believe the economic recovery is still a ways off.
The housing market is still down. The US used home sales is down with no signs of letting up. Stocks are still at a dangerous place but you might consider buying up some investment properties. The housing market makes houses cheap and people still need a place to live.
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