Slightly touched (sundara) wrote,
Slightly touched

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the state of financial affairs in our country is blue, blue, blue, not green

So, our illustrious new Fed Chief Bernanke has announced recently that the Fed "will remain vigilant in fighting inflation", which of course means raising interest rates to combat the rise of inflation.

O-kay. That's good...right?

Hmm. Well, let's see. First off, as long as they keep printing money like it's going out of style, inflation ain't gonna stop happening. So unless they slow up the production of new, crisp bills in a big way, it's a bunch of meaningless words.

Secondly, let's look at how rising interest rates will effect the majority of Americans.

What's two things that most Americans these days have? Credit cards and mortgages. And, according to many experts, people have high balances on their cards. As for mortgages, we all know what real estate prices have been like for the past couple of years. Housing costs have soared higher than ever, fueled by the low interest rates, making monthly payments for larger borrowed amounts very affordable. And many of these mortgages are creative ones, with variable interest rates and balloon payments, etc, making them volatile to the current market.

So, the Fed continues to raise interest rates, and the market follows. People's monthly minimum payments on credit cards has already gone up in the past year. Monthly mortgage payments are on the rise. Pretty soon, the housing spree that's fueled so much of our economy lately will fall off, if it already hasn't, to possibly new lows, as the high cost of houses will prove unreachable to the average buyer. Or even worse--what if this state of affairs causes housing prices to fall? Suddenly, people owe a quarter of a million or even a half a million dollars on property that is no longer worth that price, forcing them to stay in possession on a losing investment, or defaulting on the loan.

And let's not forget the rising cost of fuel that is forcing prices for everything up to new highs, especially in the housing market, adding to the overall stress on an already-stressed economy.

Santayana said it best: Those who cannot remember the past are condemned to repeat it.

We went through this once before, although few are alive to recall it. The 1920's was a decade very much like the one we're in now: Republicans in office, a lot of moralizing and legislating going on to support their views. Also, a lot of greed and business-gone-wild, Money as King and God, just as it is today. (The dichotomy of religion and money-love co-existing is mind-boggling to me) So...toward the latter part of the decade, the housing market started slumping off as production outpaced consumption, causing a sharp downturn in the national economy. And in 1929, we know what the result was.

Today, we have consumption out pacing production in our country. How can that be, you ask? Because the buying splurge has been fueled by inflated prices of houses coupled with low interest rates; people have borrowed against the new, higher value of their homes, and turned around and used it to buy things.

All we need now is one or more things happening, and the whole economic house of cards in this country could collapse in a domino effect, just as it did in 1929: Natural disasters: weather or nature-related, such as hurricanes/tornadoes, earthquakes, volcanoes; medical ones, such as bird-flu or the like, even mad cow disease; a sudden shift in public opinion, due to media coverage that focuses the public on something and therefore causes a concentrated influence in a different direction en masse; a number of other smaller influences, all of which could combine in various ways to tip things over the edge.

Yeah, I do believe we're living on borrowed time in the good ol' USofA. Our 'leaders' (and I use that term loosely) don't seem to have the intelligence nor the perspicacity to grasp things on a large, universal level, to see the woof and warp of everything that's happening being woven into whole cloth. And without that, it's just the blind leading the blind, and directly into disaster, I fear.
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