Over the next several weeks, stock markets and financial analysts will be debating as to whether or not the Federal Reserve and Chair Janet Yellen will raise interest rates for the first time in nearly a decade. Polls of economists say it’s going to happen this year, while other observers say the United States central bank can’t do it because of a lackluster economy and record levels of debt.
After last week’s devaluation move by the People’s Bank of China (PBOC), some are skeptical that a rate hike is in the Fed’s future this year. One of them includes former Texas Republican Congressman and three-time presidential candidate Ron Paul.
Speaking in an interview with CNBC on Thursday, Paul purported that China’s devaluation of the Yuan may provide Yellen with an excuse for not raising interest rates late this year. Paul also believes that a slowing Chinese economy provides enough cover for Yellen to excuse herself from deciding to hike rates this year.
“She’s going to be more hesitant to raise rates because she sees how fragile the global economy is. She’s under the gun. I could be wrong, but I don’t think they are going to raise interest rates,” said Paul. “I think there’s going to be enough problems existing, whether it’s the Chinese precipitating some crisis, or whether it’s our economy breaking down.”
According to the bestselling author of “End the Fed” and “Liberty Defined,” the Fed is too frightened to touch rates in the midst of a weak economic recovery. Such a move, says Paul, would send the U.S. economy into a recession.
Warning that a “day of reckoning” will prompt a collapse of the fixed income and equity markets, Paul says “they’re terrified of 1937.”
“[Yellen] does not want to be responsible for the depression that I think we’ve been in the midst of all along,” Paul added.
Paul isn’t the first one to be bear on rate hikes. The International Monetary Fund and the World Bank warned this summer that Yellen should delay any rate hike until sometime next year because of the fragile global economy.
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