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alstry (35.02)

10% Interest Rates or $10 Gasoline-You Pick

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June 10, 2008 – Comments (2)

At some point we will have to admit inflation is out of control.  $3 Gas, $4 Gas, $5 Gas......who knows exactly what that point is where material changes will have to take place in our society?

Currently, some of our largest financial institutions are paying about 10% to borrow money or raise capital.  If banks have to borrow at 10%, they will have to charge us more than that to stay in business.

Right now huge industries are laying off 20% or more of their workers.  Airlines, Autos, Banks/Finance, Construction, Real Estate, and related businesses.  The layoffs are causing lower revenues in those areas and lower tax receipts.  As a result of declining revenues, local and state governments have just started annoucing cutbacks.

As a nation, I am not sure we understand the gravity of the problem.  Many of our banks are in serious financial trouble.  We have stagnant wages and out of control costs around the world.  Truckers are blocking borders in Europe.  There is rioting in the streets over food prices in a number of countries.  California is being forced to layoff or reduce pay of fire fighters, police officers, and school teachers as their expenses are rising rapidly.

At what point is enough enough and what solutions could be imposed?

 

2 Comments – Post Your Own

#1) On June 10, 2008 at 9:37 PM, alstry (35.02) wrote:

Is The World Shutting Down?????

MADRID (AFP) - Two lorry drivers were killed on picket lines in Spain and Portugal on Tuesday as strikes by thousands of truckers over soaring fuel prices turned deadly.

Spanish police escorted petrol supply tankers into Barcelona on the second day of the stoppage that has caused food and fuel shortages and huge tailbacks on the Spanish-French border.

French railway workers began their own walkout, increasing the transport chaos.

Wages around the world are not high enough for many to meet expenses as food and fuel costs are  skyrocketing. 

And some talk about a housing rebound???

Never in the history of modern times have we had wages constrained by international pressures and a slowing economy coupled with exploding costs.

Transportation is the circulatory system of any economy.  Without mobility the economy shuts down.  With ease of mobility the economy flourishes.

Right now, mobility is being constrained in almost every area due to rising fuel prices.  If this trend continues, few will be able to afford to travel freely and those that were dependent on easy transportion will suffer.

 

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#2) On June 10, 2008 at 10:18 PM, Imperial1964 (97.51) wrote:

If those are my choices, I vote for 10% interest rates.  Stocks and homedebtors would suffer, but at least I'd be getting a positive real rate of return on savings.

And it's not like I expect equities or anything else to return 10% per year in the near future! 

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