The interest rate in the U.S. today is at about 0.25%. I don't believe that it could go much lower nor should it.
Instead the FED should announce a schedule of interest rates increases beginning in January of 2011, the rate in January at 0.75%, in March at 1.25% and in June at 2.25.%
Although this may stimulate savings somewhat, there's not much more to save but it should stimulate what I call “deferred development investment.”
The Republicans should get behind this but I'm sure that they will not. This will begin to create private sector jobs even before the beginning of the year.
With even temporary increasing interest rates, those wanting to investment in development will be motivated to get into it before rates go up further. The rich will appreciate this. This is better than $700 billion tax cut and especially when added to it.
Last year Norway raised its interest rate from 0.25% to 1.5%. Norway has the lowest unemployment rate in Europe, 2.7 % of its working population. Our rate of unemployment is estimated at 9.6%.
Australia has also increased its interest rate. Canada is the first in the G7 to increase its interest rate – from 0.25% to 0.50%.
It seems to be traditional wisdom that when interest rates are so low during times of economic recession that they should not be raised until the economy shows signs of gaining strength.
Our economy shows some signs, be they ever so slight. But our main purpose for announcing dates and raises in the interest rate is to add stimulation to the economy.
At the same time, we should establish a National Foreclosure Bank especially to help those whose homes are being foreclosed on.
We should also establish a program for rehabilitating the unemployed which would included education, re-education and economic support with an aim for preparing for jobs today and in the future.
An intensive programmed infrastructure development should be announced immediately and specific projects be determined as soon as possible.
I see this as the best means for getting our economy off the dime and raising people's optimism and our society running again.
Both parties should get behind this proposal. Undoubtedly, if they do, it will be modified somewhat. But let's get on with it.
Does anyone know something better to do?
So there you have it. Good Day and Good Luck.