There has been much interest and even guessing as to what the Federal Reserve (Fed) will do about its current discount rate.
It changes the interest rate occasionally for the banks borrowing from its discount window.
Most interest rates charged by lenders around the country are also affected when the Fed interest rate is changed.
This in turn affects rates credit card companies charge its customers.
The fluctuation of the Fed's interest rate has major affects on all levels of business and personal loans.
Thus, it is watched carefully and with great interest.
Most financial commentators claim that the Fed looks at the state of the country's economy, including overall spending, unemployment numbers and the inflation movement to best analyze what a proper interest rate should be.
These commentators forget one thing that is essential to the Fed rate, the value of the dollar.
Lowering interest rates makes the value of the dollar fall in the international market.
Investments in American businesses become less attractive.
Foreign countries just holding notes or dollars find them worth less than before.
The fact is that America has trillions of dollars outstanding that is being held by foreign banks and countries.
The said truth is that our country has been running a huge deficit year after year and growing larger most years.
This is because the current administration has been openly running an accepted deficit in its operations.
The lowering of interest rates devalues the U.
S.
currency just as old-time kings debased their currency by taking gold out of their coins.
The other problem Americans face is that by a relatively long historical custom, most commodities traded in the world have been and still are traded in dollars.
So such items as oil and copper have been and still are traded in dollars.
The news always quotes the cost of a barrel of oil in dollars.
Americans pay more for oil than other countries.
Most other countries pay relatively less when the prices of such items are increased.
When the Fed lowers interest rates, it also relatively lowers prices to commodities around the world, while raising the prices faster in the United States.
Therefore the deficit is in effect a hidden tax to all Americans and to the advantage of most of the world.
A lowering of the value of the dollar makes imports more expensive, the hidden tax.
However, a lower dollar lowers the prices of our country's exports.
But the fact is that the U.
S.
imports far more than it exports, so our imports get more expensive, which increases the nation's inflation numbers.
The Fed is in a double bind.
It wants to help the American economy, but will it really help by lowering rates? Higher gasoline prices alone won't help.
The solution is beyond the Fed's ability.
Another factor necessary for economic recovery is for Americans to increase savings.
The big problem of sub-prime loans became international, when Americans had no savings to invest in American owned businesses.
Sub-prime lending involved banks all over the world, even China.
Canada's dollar has recently become more valuable than the American dollar for the first time in 40 years.
Today, travelers to Europe find that the euro has become the favorite currency.
The U.
S.
dollar is not looked upon as the treasure it once was by the world.