Interest Rates, set by central banks (or in our case the Federal Reserve), are essentially the rates at which banks charge one another for very short-term (overnight) loans. It is also the rate at which the central banks charge commercial banks for holding their reserves (i.e., JP Morgan, Bank of America, Citi, etc.). When the economy isn’t doing too hot, central banks tend to lower Interest Rates to encourage consumer spending and business investment (borrowing), which they hope will in turn stimulate economic growth.
As the U.S. Unemployment Rate drops below 5% for the first time since the 2008 recession, Obama continues to pat himself on the back on what a great job he has done since the subprime mortgage crisis. When looking at the chart below, it’s tough to argue with him. On the surface, the Unemployment Rate has been cut by more than half since 2010. Surely, our economy has to be “stronger” than ever right?
Real Talk by Curtis Tan 