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Friday, February 19, 2010

interest rates rise

Here is a problem in that we face an excess flow of cash to banks generating inflation which will reduce the purchasing power of consumers. Most workers have been forced to take cuts in pay. Right now we see a reduction in hours as well as wages. Add to that an increase in taxes by states and we have a perfect storm of woe. Today the federal reserve is increasing the discount rate to 0.75%

True, this may not sound like much, but it will force banks to tighten their screws. Basically, this means less lending and what lending does take place will require a higher cost to the money. Well, one HDRKID prediction is that things will get worse. This is an interest rate rise. It will pour more fuel on the fires of an economic crisis.