The global economy is so fragile that the Federal Reserve may not be able to raise interest rates later this year as many economists expect. At least, that’s according to former U.S. Congressman and three-time Republican presidential candidate Ron Paul.
“She’s under the gun,” Paul told CNBC’s Futures Now last week. “I could be wrong, but I don’t think they are going to raise interest rates.” (Source: CNBC , August 17, 2015.)
“For some reason most of the convention economists and teachers say that it’s necessary to have central economic planning in total control of price of money,” he explained.
Paul explained that ongoing currency wars are a result of central banks’ manipulation in money printing programs and too much control over economic forces in the markets.
Last week, authorities in China devalued the yuan in order to boost the tumbling economy. A cheaper yuan would help increase the country’s exports. Many economists forecasted that the world’s second-largest economy is poised to grow at seven percent this year. However, data suggests that the economy is growing at a much slower rate.
“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,” Paul said.
In respect to the possible interest rate hike in the U.S., Paul thinks that turmoil in the Chinese economy is discouraging officials in the Federal Reserve to raise the interest rate.
“She’s going to be more hesitant to raise rates because she sees how fragile the global economy is.” Paul suggests that the Federal Reserve is seeking an excuse to keep the federal funds rate at the current level.
Meanwhile, Canada is already in a recession, Japan’s economy shrank in the second quarter, and the ongoing crisis in the eurozone could trigger a global recession. With that in mind, officials in the Federal Reserve would not want to add to the misery by raising the interest rate in the U.S.
The Fed chief “does not want to be responsible for the depression that I think we’ve been in the midst of all along,” Paul pointed out. “Everything is vulnerable, so we’re living in very dangerous times.”