“The Federal Reserve has kept interest rates at rock-bottom levels for three years already, and on Wednesday said it could keep them there for as much as another three years,” Deborah Levine reports for MarketWatch. Which raised the same questions in many people’s minds:
“How is it going to create more jobs?” [asked] Ken Jaques, credit and derivatives manager at Inform Global Markets, in a note Thursday… “It remains a mystery of just how this is going to help the economy and tame the unemployment beast. From what I can see, the Fed’s latest actions help no one but investors. How does artificially propping up share prices (like Apple’s share price needs propping up) help the general public. I find it hard to believe that the many of the more than 16 million unemployed in this country feel wealthier if the stock market goes up. I also find it hard to believe they are going to have more money to spend.”
Read more in the full article here.
MacDailyNews Take: Actually, with the amount of sharks continually trying to beat down the already incredibly undervalued AAPL, it does need “propping up.” Until Wall Street finally figures out that Apple at its full height will make Microsoft’s very best day look beleaguered, AAPL deserves all the “help” it can get. It’d also be nice if the SEC got off their fat asses and looked into the obvious manipulation that constantly envelopes AAPL.
Related articles:
Despite enormous profits, staggering growth, record sales and all-time highs, Apple stock still massively undervalued – January 25, 2012
Apple shares hit new all-time high, remain undervalued – January 18, 2012
Agreed
It’s not really about Apple. Sic Paul Krugman on him.
Paul Krugman ? The guy who thought a housing bubble would be really good for the economy? The guy who thought the stimulus, which drove unemployment up %3, would have been better if it had doubled unemployment instead? Really?
Krugman might know something about economics, but you couldn’t tell it from reading his NYT screeds.
Hit whore. Put Apple in your post, get a million hits. Ridiculous…
“I find it hard to believe that the many of the more than 16 million unemployed in this country feel wealthier if the stock market goes up.”
Name one person who got a job from a poor person….
I love how those that hate “rich” people, seem to think “jobs” are paid for by someone other than rich people.
Fox propaganda.
The rich should pay their fair share, but not demonized. I’m disgusted that Apple is getting hit for making too much money- as if they’re supposed to donate their cash to pay off the deficit. Bill Gates can give his money away, fine, but no one expects Microsoft to save our economy nor is it attacked for working conditions in China. I am a progressive who is currently disgusted by both the Right and the Left. Pro-choice, pro- equality, Very pro-Apple.
The top 1% accounts for 37% of all federal income tax revenue.
The top 5% accounts for 58% of all federal income tax revenue.
The top 10% accounts for 70% of all federal income tax revenue.
The top 25% accounts for 87% of all federal income tax revenue.
The top 50% accounts for 98% of all federal income tax revenue.
In other news……
The bottom 50% accounts for 2% of all federal income tax revenue.
Ya. Sure looks like those ‘evil’ rich people aren’t pay their “fair share”. Those ‘evil’ rich people making up 1% of returns and paying ~40% of the bill sure aren’t pay “their fair share”.
Err, kinda depends on what you think is a fair share. If person A earns $100 and person B earns $1000,000, is it fair just because person A pays 10x as much?
It always comes down to how people define “fair”.
I mean everyone paying the same can be defined as “fair”. We all pay the same price to buy a song on iTunes. That’s considered “fair”.
Everyone paying the same percentage has also been proposed as being “fair”. This is much like our sales tax. Everyone pays the same percentage in the same place. Of course since the rich make more, the same percentage means they pay more.
Then we have the rich pay more concept which has also been proposed as being “fair”, and is the current tax system. This isn’t the same as the rich pay more above, but progressively more, as they pay a higher percentage than lower income folks.
In general, while all three notions can be considered “fair”, the progressive income tax prevails because when it comes to discussing taxes and voting upon taxes, the wealthy person’s vote only counts as much as the poor person’s vote. That’s “fair” too, and since there are not nearly as many wealthy folks, they tend to lose those votes.
“wealthy person’s vote only counts as much as the poor person’s vote”
Except, of course, that the wealthy own our news organizations and our politicians and set up a system where they make people feel like their votes don’t count, or use their power over what is seen and heard to control who wins. In fact, since the wealthy control both the Republican and the Democrat wings of the Crony Capitalist Party, votes tend not to count at all. Whichever side “wins” is beholden to the wealthy humans and non-human-persons (corporations) that pay for them to get into office.
Also, many of the wealthy pay an effective tax rate that is much lower than the lower and middle class worker, because they are able to count their work as capital gains, and pay only 15%. A current Presidential candidate, Mitt Romney, paid an effective tax rate of less than 15% the last two years on income of about $42 million for those two years. What was your effective tax rate? around 25%? On how much income?
Don’t be fooled. A change is needed to bring back government that is actually representative of the people. Right now, we have essentially lost our government to a small elite plutocracy.
Wow. Good thing lower-income taxpayers have to pay ONLY federal income tax. Good thing there are no sales taxes, payroll taxes, Social Security taxes, Medicare taxes, and so on. Good thing that, after paying for basic necessities of staying alive and healthy, the poor have just as large a percentage of their income left over as those who rig the tax system to pay an effective tax rate of 15% or less.
/sarcasm
Either you are deliberately trying to lie to other readers here, or you’re just plain ignorant. Talking only about federal income taxes is either stupid or deceptive. Which are you?
Our overall tax system is regressive.
Love how the “hate the rich” narrative is being thrown around to try and deflect criticism from the 1%. If you hate the rich, you hate America is their rallying cry.
Reality: It’s not about hating success and rich people. It’s about hating cheaters who game the system, insist on no rules or oversight, make fraudulent and risky investments, then ask for bailouts once their investments go bad and they’ve crashed the market depriving millions of people of their livelihood.
The public doesn’t hate successful people, they hate liars and cheaters.
This may be the best comment on the matter I have ever seen… anywhere.
You nailed it.
Could not agree more with your post.
It amazes me that American taxpayers can in their right mind say they can trust our government with OUR MONEY!!! PATHETIC!!! What would the consequence be if any of you just FORGOT to pay your FAIR SHARE of taxes?! I’m sorry I FORGOT!!!! I did not know? Corrupt to THE CORE!!
http://americaswatchtower.com/2008/09/05/charlie-rangel-caught-in-tax-fraud-scandal/
Are you quoting Steve Martin there??
You’re missing one big point though.. The govt is now a surrogate for the powerful. Im not worried about what the govt is doing with our money as much as I am worried about how elected leaders are convinced by lobbyists (aka representatives of wealth) to enact laws that benefit ONLY people at the highest income brackets. benefits like allowing a $50+ trillion market to go unsupervised with no rules to prevent a meltdown (which is exactly what happened).
and nowhere in my comment did I disagree with you..
I have ZERO problem with people becoming rich.
If someone got Rich legally, I have no problem with that.
The problem is, they are lumped in with those that did not do it legally and are attacked for their wealth because they have it…
@Auramac, that line FAR precedes anything you think you heard from Fox News… Hell Margaret Thatcher came very close to those exact same words a long time ago.
I do have problems with those that cheat. I did NOT defend those that cheat.
I was 100% for letting GM etc go bankrupt… Bailouts are BS.
If you read the article, it DOES attack wealth. Wealth does not equal cheats/liars.
@Wrong again, Goodwill/Salvation army thrives on DONATIONS and VOLUNTEERS. not poor…
Hear hear!
“It’s about hating cheaters who game the system, insist on no rules or oversight, make fraudulent and risky investments, then ask for bailouts once their investments go bad and they’ve crashed the market depriving millions of people of their livelihood.”
Just like Romney and his ilk.
The public doesn’t hate successful people, they hate liars and cheaters.
BRILLIANTLY SAID.
It also disturbs me how literally millions of Americans are SUCKERS to the anti-99% propaganda. The RHETORICAL DECEIT going on in my country could not be more STAGGERING. An excellent example was the Neo-Con-Job lash-back speech after the Obama speech. It was imposing, dark, deceitful and reminiscent of what I can only characterize as fascist. How did being a sucker to manipulative hatred become a form of ‘normal’?! Deadly sick times.
“Name one person who got a job from a poor person….”
Well, lots of folks at GoodWill or Salvation Army wouldn’t have jobs if it weren’t for Poor people… Then again, I’m sure the poor wish they didn’t have to have a rich family to get a fair chance.
Wrong, don’t know what you’re talking about..
98% of businesses in US make under $250k. Mostly start ups, starting with little cash, working long hours with NO help from banks or rich pp. When politicisns say higher taxes hurt biz, they mean the 2% multi-natl corps that don’t need breaks. Rich and mega corps like walmart don’t create new jobs these days, they outsource them or destroy small biz; that’s part of the trickle-down lie…. its the start ups that create new jobs, stupid!
Wrong again. Higher taxes almost always affect the small business much more significantly than large businesses. If I want to hire more people, but I have to pay more in taxes for payroll, health benefits, etc., then I have to either pay my people less (which often means not being able to hire the best candidates), or I have to make less as the business owner. I’m not in business to be a charity; I’m in business to make a living and the best living I can.
Lower interest loans (if I can even get one as a small business these days, likely not) help preserve cash flow and make for lower monthly loan payments, thereby freeing up cash to hire people, buy equipment, or, heaven forbid!, actually pay myself.
exactly.
Most people don’t understand “rich” according to the IRS is 99% of small business owners.
At the end of the year it doesn’t matter if you take home $10,000 as the owner… You brought in $1 million. So you are “rich”.
People only hate the rich because they aren’t rich themselves. Give them $10 million and they’d shut up pretty quick.
I don’t hate the rich, but I’m willing to try it if you’ll give me that $10 million to shut up. Heck, I’d even do it for $2 million…
😆
RIGHT. Like Warren Buffet, one of the richest men in the world, who last week challenged the greedy to donate to kill off the budget deficit by offering a 1:1 donation match.
Bad perspective @Bizlaw.
Financial gaming remains only a game. Get your head out of it and see the world outside before the gaming fools destroy it all.
…yes.. cause Warren represents “the people”…
Keep drinking the punch.
Deborah Levine is an idiot. Low interest rates have the following positive effects on the economy:
– Allows companies to borrow cheaply (thereby encouraging them to borrow) to invest in starting or expanding their business. This usually leads to hiring more people.
– Spurs home buying which, in general, filters down through the economy with new building starts (which employs people throughout the economy: building, electrical, appliances, etc.).
No one at the Fed is doing this to boost stock prices. I find that completely ridiculous.
When money is borrowed it is pumped into the economy. This is a good thing. The lower the interest rates, the more money will be borrowed and the more the economy should thrive. That, of course, is theory. The reality is that there’s a great deal of psychology going on here as well. If people are not confident about the economy, they won’t borrow no matter how low the interest rates are. However, if the interest rates are high then they will definitely borrow less. So low interest rates generally are a good prescription for a sick economy.
It’s just Economics 101.
And what businesses really want is a stable environment. It largely doesn’t matter what constitutes that environment, it’s just that businesses can plan, and invest, and see the return on that investment. So telling businesses (small, medium, large — doesn’t matter) that interest rates are going to be kept low for another three years gives the planners some confidence to move ahead.
exactly.
Today may be ok, next year/quarter may be a nightmare.
Businesses need to know so they can plan ahead.
It is true that the Fed setting low interest rates can spur economic activity for a while by making it easier for people to get credit and funding for various projects.
However, this easy money inevitably leads to people investing in riskier projects that would not have gotten funding otherwise. This also diverts resources away from worthwhile projects. These projects create jobs and an economic boom as a result. As these riskier investments begin to fail, and the credit eventually dries up, you will have an economic bust/panic/recession/depression since many of these businesses are dependent upon cheap credit.
This is how artificially low interest rates, not set by the market, create a boom/bust business cycle. While there is a bit more to it, these are the principles that F.A. Hayek was awarded the Nobel Prize in Economics in 1974. You would think we would teach this more in economics classes.
None of this applies to Apple of course, since they are a company that has tens of billions of dollars “in the bank” and are not dependent upon cheap credit at all.
Macman1984 is absolutely correct. That is exactly what the Fed is attempting to accomplish/encourage.
Dave, on the other hand, doesn’t appear to trully understand what he is pushing. Sure, he may have read something from a century old economist, but that doesn’t make his argument actually hold any water.
What I do truly understand is that these are the same techniques that led to the dot com bubble and the housing bubble of recent years. Also, looking closely at each major long term economic downturn in American history, they were preceded by a large expansion of credit. (By various means) Setting artificially low interest rates for sustained periods of time essentially leads to credit expansion.
As far as century old economists go, John Maynard Keynes, who’s work serves as the playbook for Fed policies which you are advocating, died 28 years before Hayek was awarded the Nobel Prize. So the age of the economist shouldn’t be part of the debate.
Well, I guess this guy slept through marketing and economics class.
Interest rates are key in HOUSING (Interest is and can be a multiple of the principal cost), RENT, UTILITY cost (lowers rate of return required to provide stockholders and cost of capital to maintain their generating facilities), FOOD (farmers that must take out loans during planting season and repay when harvest)
Hmm, I think I just covered about 70% of what a family spends (housing, energy and food).
Low interest rates have historically been used to create jobs. But, in this world of wealth without product, corporations find it in their best interest to not create jobs.
Interest rates have no effect on this.
Equalize the tax rate on investments and that should have a noticeable effect.
The artificially low interest rates are killing this country. Retirement in this country is based on saving money, then living off the interest of that “nest egg” when you retire. How do we do that when CDs and bonds return 1-2% (less than “real” inflation”) People better wake up – our addiction to low interest and high credit card balances will eventually destroy our wealth.
Ask you Parents and Grandparents how their retirement funds and savings are doing.
Don’t need to, I’m already there, it’s bonds & dividends. You have to live in today’s world not yesterday’s. High interest rates usually means high inflation rates.
The days of sticking your money in a bank account are long gone. Need to invest in funds or other securities. low interest rates have a positive effect on our economy. Raising them will kill any progress we are making to recover from the debacle of 2008.
Investment returns track right along with interest rates and inflation. Retirement accounts aren’t making a lot right now (depending on your investments), but inflation is low and any loans have low interest rates as well (mortgage, car, etc.). It all balances out.
The true determining factor is how much did your Parents and Grandparents put away. If they didn’t put enough away, they won’t make a lot on any return.
It is in the interest of the U.S. government to keep interest rates as low as possible as long as its own debt overshadows all other policy decisions.
Close to 50 billion of Apple’s cash remains overseas instead of put to work here in America…why…because of the tax hit they would take if they brought their money into the country…down the road it will be 75% earnings overseas each quarter instead of just over 50%and Apple will never bring it into America and its work force. Apple is slowly becoming an international company and has enough cash to put headquarters anywhere they want. They will feel obligated about as much as shareholder are to AAPL…that’s why you don’t get a dividend, folks.
Apple isn’t bringing those profits to America and its work force, they are bringing it to the shareholders of the company.
Apple has enough cash in the US they could easily afford to hire more people here if they wanted to or even needed to. Bringing back another 50 billion isn’t going to make any difference. The tax rate isn’t holding anything back.
Maybe they should get a tax reprieve, but that has nothing to do with the argument you’re making that Apple needs that money to hire more people. They don’t.
You said it, Apple is an international company. The cash offshore was made offshore, they need it for international acquisitions, investments and expenditures.
Apple had $54B in its overseas subs a quarter ago. US corporate taxes on $31B of that amount has already been accounted for as Apple intends to bring it back someday. The balance, about $23.2B will remain overseas as working capital, and no US taxes have been accounted for. That’s why Apple’s net tax rate is surprisingly high at around 25%, even though they do 2/3rds of their sales overseas. It’s because they’ve already booked the tax hit on over $30B of that foreign cash.
Of course, all the numbers are higher now, but we won’t know the exact breakdown until the 10q is released.
How do low rates help Apple? Apple doesn’t borrow money. They invest their excess cash in US Treasuries for the most part, earning those low, low rates, and financing the US debt.
Are the low interest rates in the interest of promoting buying (homes & cars)? Or in the interest of promoting saving? ???????