Article 1 Link: http://www.ibtimes.com/us-economy-2017-trumps-policies-oil-prices-interest-rates-dollars-value-other-trends-2467898
First, this is not a political blog, but politics clearly have an impact on the overall economy. Regardless of all the controversy surrounding Trump’s election, there is a lot to say about the anticipation of what’s to come next year for business. This International Business Times article recaps the current trends and where we expect to be in 2017.
- The Fed Plans to Increase Interest Rates
- There are a bunch of effects that could stem from an interest rake hike. Generally, the Federal Reserve bumps up interest rates to curb inflation. Since the financial crisis, rates have been extremely low in order to stimulate the economy. It basically makes it cheaper for consumers, corporations, and banks to borrow money and, in effect, allows for more money to be in circulation. After a strong economic year in 2016, coupled with the optimistic prospects for business under a Trump presidency, the Fed has announced a gradual increase in interest rates next year to prevent the economy from ‘overheating’.
- Trump’s Policies Could Prove to be Good or Bad
- If Trump’s proposed infrastructure stimulus package that’s quoted to be worth $1 Trillion is implemented, it could produce thousands of jobs. Good.
- If his proposed trade barriers against other countries are implemented, namely against China, it will dramatically limit business with a highly trade-dependent country (although China is increasingly becoming a domestic consumer economy). This could mean higher prices for goods that are typically imported from China. And there are a LOT of those as we know. Bad.
- Of course, this is all dependent on whether there is any follow-through from his campaign promises.
- A Stronger U.S. Dollar
- Again, good or bad. A stronger dollar means good for U.S. consumers purchasing abroad, but bad as this would mean dollars leave while purchased goods remain in the U.S. This means an increase in the trade deficit.
- Mortgages Will Get Pricy
- Naturally, if the Fed bumps up rates, then home loan rates are soon to follow. This is an anticipated effect on borrowing money across the board. The idea is that if it’s more expensive to borrow from the Fed, the market will dictate that banks and other institutions will want to maximize returns on money that they lend to others. Hence, the followed increase in their rates as well. Mortgages are no different.
- Increase in Credit Card Delinquency
- Again, higher interest rates, means it’ll be tougher to pay off your credit card debt.
- Higher Oil Prices
- As far as I understand it, this has less to do with Trump’s presidency, but rather a direct impact of a decrease in oil production by OPEC. The laws of supply and demand dictate an increase in prices in this scenario. It’s interesting to note that there have been times in history where OPEC-affiliated countries have secretly gone against agreements to decrease production in order to take advantage of price increases.
With Trump’s vows to improve infrastructure, put burdens on companies that ship jobs out of the country, and place trade barriers on key countries, many corporate execs are optimistic about the next few years for business in the U.S. Again, this all depends on whether he follows through on his promises, so we’ll just have to wait and see.
Personally, I think what’s most interesting and controversial is whether he follows through on his non-economic initiatives…
Article 2 Link: http://money.cnn.com/2017/01/03/news/economy/ford-700-jobs-trump/index.html
Article 3 Link: http://money.cnn.com/2016/12/06/news/economy/donald-trump-ceos/index.html?iid=EL