Washington: Former congressman Ron Paul warned, ‘There is a major upheaval in the US stock markets. Seeing that the condition is not improving the investors will start deserting the market. The situation that will follow will be worse than the 1929 recession.’ Against the background of Paul’s warning, the US stock markets declined by nearly 1.5 to 2%. The increase in the interest rates by the Federal Reserve is believed to be the main reason behind the fall.
Paul drew attention to the US-China trade war. The former congressman indicated continuation of the trade war by saying that this war will not end anytime soon. The problem of the taxes imposed on imports cannot be resolved immediately. Finally, it is a part of taxation. At the same time, Paul claimed that the main reason for the upheaval in the US economy is the borrowing by the Federal Reserve and the availability of vast amounts of funds to the political leaders to spend as per their wishes.
He also expressed fears of a huge bubble to have been created in the economy because of the financial aid policy adopted by the Federal Reserve since the 2008 recession. Paul had warned around two months ago that the US stock market would fall by nearly 50%. He had also warned that the United States would be faced with a severe economic crisis shortly.
The predictions by Paul seem to be coming true given the fall in the US stock markets since the last few weeks. In December, the main stock markets in the United States, Dow Jones and S&P 500 saw a major fall. Dow Jones and S&P 500 have declined by nearly 17% and 14.5% respectively. This is the first time since 2015 that these stock markets have experienced losses and this annualised loss is said to be the biggest since the 2008 recession.
While the main stock markets have had record declines, the Federal Reserve has increased the interest rate by 0.25% increasing the current rate from 2.25% to 2.5%. Chief of the Federal Reserve, Jerome Powell announced the increase in interest rates expressing concern about the national economy. This is the fourth time that the Federal Reserve has increased the interest rate, in the year.
There has been a severe reaction in the stock market to this Federal Reserve announcement, and the Dow Jones Industrial average crashed by a full 351 points. S&P 500 declined by 39 points, and the Nasdaq Composite Index dropped by nearly 147 points.