Interest rates

I think rates will stay low kind of like Japans lost decades. Once the bottom falls out it is very hard to raise rates in an economy that is stagnant.

Our rates never went down damn and blast...I would just about kill for an interest rate cut 😕

I wonder what the best scenario is? Interest hikes can be a tool in countering the hyper inflation all this QE is going to cause but it will stifle consumer spending and bankrupt some people. They have to cut spending,raise taxes, raise interest rates and keep the economy on life support. WTF? Seems like it would be less painful in the long run just to pull the plug now.

Lower interest rate = more spending for me. I buy the things now that I need when rates rise so that 80% of that income can go right into debt payment. I do not want to hold cash if interest is low. If everyone is saving I spend, if others spend then I save. More spending by the masses = higher prices and less spending by the masses = lower prices since competition is high. So in conclusion, whatever most do, I do the opposite of that.

A few things:

Low interest rates encourage borrowing; by individuals, but especially by governments.

When other nations and creditors decide that returns (ie. interest paid to them) are too low for the risk, they will stop buying government debt (bonds) and rates will rise. This is what happened in Greece, and is happening in Italy and Spain, with rates around 6% and approaching 7%, at which point most economist think Spain's debt will no longer be sustainable (meaning they won't be able to make their payments).

It all makes a lot more sense if you take out the jargon and imagine the various govt's of the world as individual people. If you go to the bank or credit card agency and keep asking for loans, they are going to eventually doubt your ability to pay the loans back, and jack prices on your next loan to reflect on you unworthiness. In the states, however, the Federal Reserve is the buyer of last resort, and will monetize (ie. quantitative easy, also known as printing money) any amount of debt the US needs and thus dilute the money supply and result in inflation or perhaps hyper-inflation.

If you ever see a failed bank auction in major world economies, especially the US, beware! And for you own sake, lock in your mortgage while rates are low!

With the path the central banks are on, it is inevitable. It has already happened last year in Germany, this year in Spain and it is coming soon to a nation near you. Interest rates will rise again. Heck, it's not like they can get any lower, and there is only one way for them to go.

http://www.bloomberg.com/news/2011-11-23/germany-fails-to-receive-bids-for-35-of-10-year-bunds-offered-at-auction.html
http://www.guardian.co.uk/business/2012/apr/04/eurozone-crisis-spain-bond-sale

Your spending yourself into debt?

That makes no sense whatsoever - artificially low interest rates only increase the likelihood of hyper-inflation and if history is any indicator, I would suggest people dump the debt and put on your flame-proof underwear!

AlbertaPrepper

Guess it depends on who you are. I do not hold fiat currency in very high regard. Nothing I have is secured debt. I do intend on paying debt but only if rates rise. It would take us 1 year to pay all debt off if we lived off the preps. They keep giving us interest rates at 8% below REAL inflation and I will keep spending now and paying later. When interest rates are higher than inflation then I reverse and pay debt off and live with the items bought when rates were low and inflation was high.

Hyperinflation I plan on buying nothing really and then paying debt with hyper inflationary dollars.

Gravlore, sorry, but I just don't understand the logic - but I may be missing something here.

Either way, I am not one to judge as I've not walked a mile in your shoes.

~Make it a great day!

AlbertaPrepper

Ditto.