Bass Ackwards Interest Rates?
What do you guys think would happen if the Fed did the opposite of what is expected and started raising interest rates? Sure, a lot of people would lose their homes, and possibly some other assets. Perhaps a lot of banks would suffer, close, or be bought out. But I think a lot of these things are going to happen, to some extent, anyway; plus I think these morons deserve it - Let them lose their homes, and their cars, that would put "the American Way" in its place. Heck, I think it would solve a lot of non-financial issues too (spoiled Americans, etc.).I think the dollar would immediately strengthen significantly (especially given inflation concerns in Asia & Europe, and relativel low rates worldwide). Really, demand for the dollar would go through the roof. I know fuel and oil prices are going up because people are hiding there (along with gold, etc.), but if the dollar was a bit stronger, I think oil prices would drop a bit as well (and if you ask me, gas prices are the expense that is REALLY hitting Americans in their piggy banks). I dunno, I think all this talk about how to bail out stupidity is a bad idea; it's putting the smart people in worse place. Let capitalism run it's course. Again, I'm not suggesting this is my point of view per se, but I've been pondering it for a few weeks now and just thought it would be an interesting topic.
To a certain extent, what you’re seeing now (economically speaking) is similar to the Fed raising rates. Although rates are low, lending standards have tightened considerably; shutting-out all but the most qualified. It would be similar to offering a top of the line 2008 Rolls-Royce for no money down and 0% interest for 5 years. Even though it’s a great deal, few could afford it.
The piece you’re speaking to ice is important. Once this financial crisis disappears so may the lower rates. How much fixed income do we want in people’s portfolios when that happens?