In March of this year the President of the United States boosted the economy by signing the CARES Act – the biggest economic relief package in American history. “I’ll sign the single-biggest economic relief package in American history and, I must say, or any other package, by the way. It’s twice as large as any relief ever signed. It’s $2.2 billion” Donald Trump said.
This legislation provides for direct payments to individuals and extraordinary support to small businesses. This historic bill included $300 billion in direct cash payments to every American citizen earning less than $99,000 per year as well as $350 billion in job retention loans for small businesses and around $250 billion in expanded unemployment benefits.
The Federal Reserve Bank has also gone to great lengths to keep the economy running smoothly amid coronavirus lockdowns by gradually cutting its benchmark rate to near zero.
Despite the drastic economic measures already taken by both Trump and the Fed, the President feels that the country could do more by utilizing negative interest rates. Trump has been pushing the Fed for lower interest rates since last fall. Last September, the president referred to the members of the Fed as “Boneheads” in a barrage of tweets pressuring Powell to reduce rates.
In a speech at the World Economic Forum this January, Trump doubled down on his desire for negative rates. “We’re forced to compete with nations that are getting negative rates, something very new,” Trump persisted. “Meaning, they get paid to borrow money, something I could get used to very quickly. Love that.”
“As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the ‘GIFT’. Big numbers!” Donald reiterated his desire for lower rates via Twitter in May.
The Fed Chair Powell explained during the interview with 60 Minutes in May, that when a country lowers its rates below zero, banks essentially pay people to borrow money. This strategy has precedent—some countries have lowered their rates below zero as a result of the financial crisis last decade. The Japanese Central Bank and The European Central Bank have both used negative interest rates as a policy, even well before the current global pandemic.
“There’s no clear finding that it actually does support economic activity on net, and it introduces distortions into the financial system, which I think offset that,” Jerome Powell insisted in his recent interview to 60 Minutes. “There’re plenty of people who think negative interest rates are a good policy. But we don’t really think so at the Federal Reserve.”
According to Jerome Powell, the Chairman of the Federal Reserve, the central bank will remain averse to using negative interest rates in response to the economic impact of the coronavirus pandemic. Other critics of the negative rates have warned about the possibility of inflation and possible crash of the dollar as the most liquid currency in the world.
In the meantime, local businesses and private individuals enjoy the unprecedented support that the combination of the very low interest rates and most recent economic stimulus package provide. In addition, with the US government run affordable housing websites such as Hudhomestore, and free credit service providers read Credit Sesame Review Americans can now secure very affordable housing and car loans in these challenging times.