by Ace
The Fed raised interest rates by 0.75% again. This is the third time they’ve raised it by three quarters of a point.
The Dow fell 522 points by the close.
The Atlanta Fednow tracker for GDP projection has reduced its forecast for the third quarter to almost zero — 0.3%.
They’re trying to avoid the psychological shock of a full one point hike.
The media is offering headlines suggesting it’s the Fed who is “taking the economy off the side of a cliff.”
No, it was Joe Biden and the Democrat Congress who did that. They caused this runaway inflation. When you set a fire, the next thing that happens is that the fire department comes to put it out — and you can’t complain when they spray water everywhere and ruin all your furniture by soaking it.
But that’s how the media is playing it. It’s The Fed’s fault!
Why is The Fed ruining Joe Biden’s wonderful economy?!!SMALL BUSINESS PLAYBOOKThe Fed just raised interest rates by another 0.75%, putting Main Street economy ‘dangerously close’ to edge of lending cliff
That’s the unfortunate intention. Biden pumped a trillion plus dollars of excess dollar bills into the economy. And then, just a month ago, he pumped in another $740 billion.
The only way the Fed knows how to correct for this is to raise interest rates so high so as to make it hard to borrow money. This makes it hard for banks to inject new money into the economy — borrowed money is basically money taken from the future and put into circulation in the present. By reducing the amount of money that can be “borrowed from the future,” the Fed hopes to offset the trillions of extra dollars Biden has already flooded the economy with right now.
This is a painful process. It’s ugly. It’s miserable.
Which is why governments usually attempt to not unleash toxic hyperinflation upon their country.
But your leftwing propaganda lugenpresse is here to tell you: It’s all the Fed’s fault. They’re the ones doing this!Small business owners have not faced lending costs reaching into the double-digit percentages in decades.Small Business Administration loans could rise to above 9% by year-end if the Federal Reserve continues to raise rates in its battle against inflation.
Rates should never be the sole determinant of business growth strategy and a decision to source new capital, but lending costs are nearing a point where monthly cash flow may not be enough to cover debt repayment in a softer economy.
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If the Federal Reserve’s FOMC next moves match the market’s expectation for two more interest rate hikes by the end of the year, small business loans will reach at least 9%, maybe higher, and that will bring business owners to a difficult set of decisions. Businesses are healthy today, especially those in the rebounding services sector, and credit performance remains good throughout the small business community, according to lenders, but the Fed’s more aggressive turn against inflation will lead more business owners to think twice about taking out new debt for expansion.
Partly, it is psychological: with many business owners never having operated in anything but a low interest rate environment, the sticker shock on debt stands out more even if their business cash flow remains healthy enough to cover the monthly repayment. But there will also be more businesses finding it harder to make cash flow match monthly repayment at a time of high inflation across all of their other business costs, including goods, labor, and transportation.
“Demand for lending hasn’t changed yet, but we’re getting dangerously close to where people will start to second guess,” said Chris Hurn, the founder and CEO of Fountainhead, which specializes in small business lending.
“We’re not there yet,” he said. “But we’re closer.”Businesses which are struggling will find that they can only get loans at high interest rates. They will have to choose between borrowing at high interest rates — which may be unprofitable — or just shutting down.
Businesses which are looking to expand will face the same choice: Borrow at a cost which will make expansion unprofitable, or forgo expansion? Many will chose not to expand in this borrowing climate.
People thinking about starting up a business face the same choice, but with an even tougher bite: Starting up a business is always tough. Many businesses do not turn profitable for the first couple of years, and many business owners do not pay themselves a salary during this period. They live on borrowed money.
But the cost of borrowed money is high, and going up still further. So the costs of starting up a business is very high.
Many people thinking about starting a business will therefore choose not to do so, and those who choose to give it a go will find it even more painful than they expected.
But, again: