Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What Does a Trump Presidency Imply for The Credit Market?

Stock-Markets / Financial Markets 2016 Nov 16, 2016 - 06:29 PM GMT

By: Nicholas_Kitonyi

Stock-Markets

The US just voted Donald Trump to become the next president in the process shocking the world after going against all odds. Many people, including the media, polls, analysts and statisticians had predicted that Hillary Clinton would win the election, but in the college electoral vote she was resoundingly beaten by Trump.


While several people will be trying to look at how this all happened. It would be of much interest to look at the implications on the various aspects of the US economy and especially the financial sector. Trump was very vocal on his perceptions of America’s relationships with foreign nations during his presidential campaign and up to this moment, he has done nothing to indicate that it was all for nothing—but a political ploy to woo voters.

Who owns the US debt?

China, which is one of America’s biggest export destinations, has already threatened to respond in kind should the US impose trade obstacles between the two countries. In addition, China is also among America’s leading creditors accounting for more than 30% of the country’s foreign debt.

The U.S. debt to China was at $1.185 trillion, as of August 2016. That equates to 30% of the $3.948 trillion in Treasury bills, notes, and bonds held by foreign countries. The rest of the $19 trillion debt is owned by either the American people or by the U.S. government itself. Unless the US wants to revert to having nearly 100% of its debt owed to the government and its citizens, it may not be a wise thing to impose trade boundaries against China.

Currently, the U.S. citizens and American entities, such as state and local governments, pension funds, mutual funds, and the Federal Reserve own 67.5% of the debt. Increasing that figure could set the country on a deadly path especially considering President-elect Trump’s other propositions.

What’s Trump’s stand on interest rates and taxes?

Trump has been quoted on occasions expressing his views on the country’s current interest rate levels. Most of those times he has indicated that the current interest rate levels are very low for no genuine reason and that they should be increased. While he appears to have since softened his stance, there is no telling that once he is inaugurated he won’t make those changes.

This could have devastating effect on economy if not done cautiously, especially considering his plans on taxation. Trump has expressed that he intends to lower taxes. That does not go down well with his plan to impose trade restrictions on foreign countries especially ones that contribute significantly to the national debt.

How could this affect the American citizens?

Taxation and debt are sources of revenue for the country, so if you cut down taxes and impose measures that could reduce funding from foreigners via debt while at the same time increasing interest rates—it could cause an economic meltdown.

That would mean squeezing money out of the economy which for the one and only good reason would boost inflation. However, as many credit monitoring experts would say, the impact on citizens may not be as positive.

This is because increased base interest rates would lead to an increase in lending rates thereby increasing the cost of debt for the American citizens. In addition to this, increased inflation makes products more expensive and given the fact that the US economy could be under extreme pressure following the implementation of Trump’s plans, things could become very tricky.

The credit market is a crucial element of any economy. Businesses and people fund most of their developments and investments using debt. As such, by making credit more costly in an economy that is yet to recover fully from the global financial crises of 2008/2009, it could be counteractive to the progress that has been witnessed over the last few years.

Conclusion

In summary, the US is not off the hook yet. The country is currently the best performing economy amongst other developed economies, but one of the reasons why that’s the case is because it has followed a cautious path in trying to stimulate growth.

The inflation rate still remains low, which implies that increasing interest rates massively could humper economic growth. Furthermore, with a majority of other developed countries still experiencing the global financial crises aftershocks—and struggling—America could still be prone to a potential ripple effect should the situation escalate globally.

By Nicholas Kitonyi

Copyright © 2016 Nicholas Kitonyi - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in