The prospect of the Federal Reserve remaining on track to raise interest rates later this year is still settling in, yet people fail to grasp that raising rates will be bullish and it will confirm the capital flows are moving into the USA. We have a serious divergence between the USA and Europe. Not only is the USA the best situated from the problem of the greying of society, but the lower taxes in the USA remains key, as well as the fact that FATCA does not apply in reverse. Foreign citizens can come to the USA and open bank accounts without a problem; Americans cannot leave the country with the same privilege.
Capital inflows are pointing straight to the USA. As real estate is on the high end, and stocks look good, more and more capital will travel into the USA. The Fed will be accused of creating the bubble, since the domestic press will never understand the complexity of the world economy as a whole. So the Fed will face blame for creating a bubble, both from the media (rich are getting richer) and from Congress.
Meanwhile, there are growing concerns that financial woes could engulf Spain, in addition to Greece. Higher interest rates for the world’s largest economy could lessen the likelihood of economic survival among the allure of the emerging markets, adding to the problem of Europe going negative. Everything so far appears to be shaping up for a Phase Transition in the USA. That will baffle most and will place the maximum amount of pressure of Asia and Europe. By the time we get to the other end, they will be calling for a one-world currency – just watch.
