Signs of a coming economic earthquake

The age of cheap credit driven economic growth is drawing to a close as world lenders are all in agreeance that the artificially low interest rate needs to be raise soon. This is a dark cloud on the horizon for many in the financial industry as many believe that the markets are on the verge of a colapse that could dwarf the dot com adjustment a few years back. The current nervousness is illustrated in the article below.

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his shift in financing costs has helped to push up bond yields worldwide, emerging market debt spreads have narrowed and stock market gains have slowed or stalled in many large economies, raising questions about where next is safe to invest.

At the same time, the recent surge in oil prices has revived the inflationary spectre, while the massive increase in debt loads in the United States and Japan causes worries there could be a nasty upset as cheap financing comes to an end.

Anyone who knows even a little about the financial markets knows that an interest rate below 6% is not sustainable over the long term. Interest rates below this level are like taking ephedra. It will let you stay up longer but there will be a crash when you can no longer take the pill. We have been below a 6% lending rate for several years now. There is a an impending shake up in the currency market and the banking industry in general. It is not a matter of if but of when. THe signs coming in tend to suggest that the when in coming soon than later. I fear for those who have unsecured debt tied to the prime rate because your monthly payments could very well double over the next year or two depending on how this shakes out. The Fed gave the economy one last huge hit of cheap money here not too long ago and when the effects of this wear off there is likely to be severe consequences for our credit addiction. Take a warning and consolidate your unsecured variable rate debt now before the money industry takes the plunge and you fall in with it.

www.house.gov...

www.cato.org...

www.econedlink.org...

www.libertyhaven.com...

If you don't link to any of the above link to this page and scan through the last couple of most recent posts. They are worth the read.

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[edit on 25-6-2004 by Johannmon]

Thanks for the info, I always wonder why the interest rates are still so low, I am glad we (husband and I) never trusted variable rates. And for oil I think the raised in oil is just a tease to see how much Americans are willing to pay for gas at the pump, I believe we are going to be stuck with this increased in gas and that�s it.

Hey the whole country is in debt up to its eyeballs. What difference does it make if joe average has the same problem. We are all going down together on this one. Might as well spend it while you got it to spend and then declare bankrupsy and start over. I guess that is a bit morbid but if your on a sinking ship you might as well raid the wet bar and take a few towels with you.

i wanted to post this link to the current money situation on the world markets.

link

The article talks of a small interest rate hike in the near future. Could this be the first trickles as the dam bursts on the money markets. Remember we have not yet ridden out the feds unprecidented expansion in the money markets yet they are already beginning to raise rates.

I have always believe that the world market always wait for the US decisions because we are one of the biggest investor in the world and their markets are affected by US.

So is fear to said that if US market plunge so the rest of the world too. Right?

So if the interest rate rises in US. Then the rest of the world will react negatively. Right?

It is fear of the world consequences of a US economic down turn that have bouyed the US economy to this point. It is only because Japan and China have bought up all excess dollars that the fed produces that we have not suffered the effects of the impending shake up already. The world wants to see us keep going for as long as possible but you can't stay high forever on artificial stimulation. There will be a crash. It is only a matter of time.

I agree with you on the economy having a crash but I do not think that it will be call a crash, perhaps the way the world does business and the way our economy is so intertwined with other countries I think they will come out with another name for it. Remember the strongest economically country in the world can not afford to admit it can have a down fall.

I am not an expert I am just guessing.