Interest rates will rise quickly and those hikes are going to be pretty big. Those with home equity loans, credit card debt and other variable rate loans will soon feel the pinch in their wallet, forcing them to cut back in other areas if their finances are already stretched thin.
As Forbes reported, when the Federal Reserve Board (The Fed) changes the rate at which banks borrow money, this typically has a ripple effect across the entire economy including equity prices, bond interest rates, consumer and business spending, inflation, and recessions. As far as the big picture goes, there is often a delay of a year or more between when interest rates are initially raised, and when they begin to have an effect on the economy. As consumers, however, we feel these increases almost immediately. Americans will begin to feel the burn in the floating rate debt they are holding. This includes credit cards, student loans, home mortgages, and equity loans because all move right along with the Fed.
Because interest rates have been rising at a slow pace, most haven’t noticed the effect just yet. But according to research by Forbes, evidence strongly indicates long-term U.S. interest rates are at a secular decision point, one that is likely to eventually be resolved by significantly higher borrowing rates over the next one to several quarters.
The Fed is is currently in the midst of a hiking cycle that began at 0.25% in December 2008. The S&P 500 actually bottomed three months later, in March 2009, shortly after President Obama first took office. Short-term rates have slowly risen since then, by another 50 bps to 0.75% in late 2016, by an additional 75 bps to 1.50% in 2017, and by another 75 bps to 2.25% thus far in 2018. –Forbes
The other factor to consider is that consumer spending currently comprises 68 percent of the United States’ economy, and U.S. household debt has risen over the past 18 months, especially in floating credit card debt which is up 2.6 percent according to the Federal Reserve Bank of New York, Center for Macroeconomic Data. If a quick and big spike in interest rates does happen to occur, Forbes anticipates that that would have a meaningful adverse effect on the U.S. economy in 2019, as well as on U.S. equity prices.
The best way to prepare for this is to begin to aggressively pay off any loans that move along with the Fed’s interest rate hikes. Pay down the lowest amount first and then take that money you were spending on the small loan and apply it to a bigger one until it’s paid off, and so on. Take steps to eliminate debts that are subjected to the Fed’s hikes now so that you won’t feel the pain as much in the future.
Well, for once – I agree. Stay out of debt. Or get out of it fast. It is why we all come to this site and/or others like it. Get ready, stay ready, be ready.
But Wait!!!! Watch this Video and you make think something different. The elite are NOT going to crash the economy under Donald Trump. Here’s why.. 1.12 Million views.
If you put lipstick on a pig, its still a pig.
TSB, interesting video. But what if Trump is assassinated? We get Pence and I keep hearing he’s deep state. If that’s true, then the globalists will jump for joy and go back to their old agenda. If that happens all bets are off. At best, Trump has bought all of us some more time. This economy is not going to be saved no matter what he does. And I still expect things will blow up around election time, only a month away. I’ll be going back to the BOL right before Halloween and staying for up to a month, maybe longer. All we can do is wait and see.
Rates will rise until the bubble pops then will come down again.
Use the high rates and strong dollar to buy things that are on sale globally.
It has to happen. Simple economic principles provide proof.
Or do the real American thing: Max out your cards and then file for bankruptcy.
Just as the FED rates have been going up, so has the price of everything else.
Here is Upstate New York inflation is really starting to kick in. Food prices have gone up 12.5-percent in just one quarter. When your chicken Caesar Salad goes from $8.00 to $9.00 in just a week you know inflation is rising higher than the FED target of 2-percent.
10-year Treasuries rates went up to 3.20-percent in just one day.
This is the trickle down effect?
Might want to do your Christmas shopping now. You also better stock up on Emergency Food preps. Stock up on laundry detergent, cleaning supplies, coffee — the necessities.
“The last time that the United States experienced double digit inflation? 1981. In 1981, the annualized average inflation rate was 10.35%. The two years before that were both over 10% as well, with 1979 coming in at 11.22%, and 1980 coming in at a whopping 13.58%.
With the United States very likely needing to print trillions of dollars to fund their deficit spending over the next decade, inflation is going to likely announce itself (in a big way) to the nation.”
I lived through 18-percent inflation rates back in the late 1970s and 1980s. This is how it started. 12.5-percent here. 12.5-percent there. And pretty soon your money is worthless, and you’re filling your gas tank just enough to get you home.
Unlike last time, because the entire economy and government is fully-rigged, manipulated and controlled people are going to be rudely awakened that the inflation rate is not 2.67-percent, and how badly the have been lied to.
Blame-e, you were reading my mind? LOL. I’m already doing that and I’ll be taking another load of supplies to storage at the BOL right before Halloween. Next week after that is the midterm elections and I have the feeling the cities will explode regardless of the results. Will this be the bugout trip, the final trip for me? We’ll see. If things go like I’m afraid they will, I’ll already be where I really need to be.
interest rates and inflation always gets passed on to the consumer. Reduce debt,thats half the problem.
Imo buy gold and silver if you can
And if you are worried about mayhem stock up on preps and get a bol if possible.
In so far as the bol is concerned Im hoping the high interest rates create better buy opportunities. What do all think? Is water and foliage preferable to desert and no bugs or would something mountainess be best?
Ever read “Silent Spring?” Going back 60-years, there are no bugs by comparison, on the windshields of either coast.
There is no water, on either coast. Nestle is about to suck the Great Lakes Dry. The Colorado River is about to run dry. Over population is going to see to that.
A hundred years industrial farming has resulted in the pumping of phosphates and nitrates into our bodies of fresh water has added to a new problem.
Add this to the general warming of the climate worldwide. We are witnessing a dramatic increase in algae blooms in all open bodies of fresh water and reservoirs. The worst (so far), are these deadly forms of blue green algae. Fresh water intakes are getting clogged with the stuff. Most communities are preparing for a switch to well water.
The Rust Belt thought that one benefit of losing all those millions of American jobs and tens of thousands of manufacturing plants would be an environmental reset. You know: “Look at the bright side,” and all that.
What has happened is that a hundred years of industrialism has filtered down into the well water. This is going to give new meaning to “the death of the Middle Class.”
Radiation levels are rising worldwide, and on both coasts here in the United States. The EPA is looking to raise acceptable levels of radiation to reflect the fact that radiation levels have already risen — mainly due to Fukushima Daiichi.
Chernobyl is still on-going. The reactors on those sunken US and Russian submarines didn’t just go away.
All said and told, there is a good chance that we are experiencing another mass extinction event.
Everybody has experienced inflation, when your money buys less than it did before. However, in the past the basic strength of the USD and the fact that it was the world’s reserve currency, everybody had faith that the USD would come back, that the loss of value and power of the USD was temporary.
I don’t see that happening this time around. The coming recession everybody is talking about came in 2008-09 and never left. There was no “Great Recession;” we have been in the process of a Depression. Slow motion, gathering speed, momentum, power and force. Staying power.
The value of the USD has fallen 98-percent since the creation of the United States’ central bank, the FED, in 1913. Eventually, all fiat currencies fall to zero. And you know what they say: “It’s not the fall, but the sudden stop that kills you.”
There are some good videos by different homesteaders. I’ve been watching them for useful tips.
There is a soap called Zope. It can be used with a few other products to make laundry and dish soap. It is less expensive than another brand and no chemicals. You can make soap from wood ash lye water, vinegar, borax and Arm & Hammer Washing Soda (not baking soda). Stock up on all these, and learn as you go how to combine ingredients for healthy and safe soaps and detergents. You also need lard or coconut or soybean oil and a special olive oil made from the pits. All these things have multiple uses. And not all of them are needed to make soap.
Stock up on garbage bags.
Get some $3.00 buckets at Home Depot and buy 2 toilet seats for everybody in the house.
Don’t rely on refrigeration. It is convenient but costly. Think long term.
@the blame-e says: ++1, From a former Upstate New Yorker, I appreciate your very thoughtful, astute posts. I’ve lived through the eras you’ve described (quite accurately). While decades in the making, it is still so surreal to witness such rapid, accelerating deterioration converging on so many fronts at about the same time. Most people are apparently oblivious to the pending financial, social and ecological disasters immediately ahead. Which one(s) will take us down? I’m prepping like crazy but painfully aware of my vulnerabilities. I’m better prepared than probably 98% of the population, just not where I’d like to be given the enormous challenges ahead.
@Sparky. Nice to hear from you.
I moved back to Upstate New York after just over 25-years on the west coast in 2014, just after elevated levels of background radiation started showing up in the wines made in Nappa Valley. I moved just after ICE started searching the woods nearby for illegals camping out and burglarizing local homes. They were all escaping further north, into Canada. I left when the unemployment rate and the temperate climate created homeless camps all around where I was living.
Here in Upstate New York the winters kill off the homeless, and the illegals don’t much like the climate here either. However, Catholic Charities, with the financial support of unelected rogue billionaires like George Soros, are dumping tens of thousands of Muslims and North African nationals in my state. The place looks like a Soweto ghetto, with Black Adidas walking the streets, and roads, and highways. Most of them have never driven a car or operated an ATM in their lives.
They all go on the doe, supported by New York taxpayer money handed-out by Progressive Socialist Democrat, Governor Andrew Cuomo. Hard to believe that just one family, the Cuomo Mafia Family, has been in control of this state since the 1980s. There is something truly evil about professional family dynasties in the United States. They need to be stopped.
My family is here; been here since the 1850s. So, there’s that. As you get older, the propaganda the government filled your head with against the American Family wears off.
If I get the chance I plan to make just one more move, to Northern Vermont. White Christmases. I miss them. The snow line has moved further north than where it use to be here in Rochester, NY. I also want to live in a state where the Rule of Law is still practiced, along with the Constitution and the Bill of Rights. You won’t find any of that here in Upstate New York.
The Progressive Social Democrats like Governor Andrew Cuomo, the unelected rogue billionaire Michael Bloomberg, and the wholly owned “New York Times” won’t let you.
The terms of the loan are subject to change, during your agreement… tfw derp…
Find a better way.
I lived through the 1970s high inflation and interest rates. Candy bars went from being 5 cents to 25 cents and then 50 cents within 2 years. Home interest rates reached 20%. On the plus side, the little bank account my grandmother set up for me with 5 bucks saw amazing growth at those rates and helped fund my first year at university.
What is happening right now is Asia is exporting inflation, not deflation. This means the cost of everything imported is going to quickly rise. And in order to defend the financial system and the US dollar, banks will need to offer – and charge – higher interest rates.
You can work this to your advantage but this requires making things that Asians want to buy. And the problem there is that the Asians pretty well make everything under the sun. And if you have something unique, they will reverse engineer it and steal the intellectual property and sell it back to you for less within a year.
Today your savings account pays nothing (practically) in interest. Japan crap was replaced with Asia crap and now China crap. The major difference between the 1970s and today being there is no recourse to a total lack of quality control with China. We don’t want to go to war with China. All China has to do is wait 4-years for its armies of stuff over here to break to declare victory.