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Tuesday, February 19, 2008

Personal Finance QuickTake: Uneasy Feeling



Yahoo had a really good article today talking about consumer sentiment. Basically even through the housing boom and access to way too easy credit, consumer sentiment has been a bit wary. It was almost like everyone knew this was too good to be true.


Easy credit has led directly to a disconnect with consumer's paycheck and their ability to spend. Gas prices rise, which raises price inflation food and travel, heap on medical expenses running at high double digit growth and a melt down is inevitable.


This is called...inflation.


The problem is you don't fix inflation by lowering interest rates! You do by raising them. This puts our Fed in a bit of a bind. If the raise rates the economy tanks, if the lower them inflation goes nuts.


How bad can inflation get? Picture Europe before WWII. Literally wheelbarrows full of money to buy bread! Not worth the paper it is printed on...Not saying go dig a trench and hide, it it foretells of tougher times ahead. It also says that this doesn't get fixed with a $1200 check from the Government.


How do we cope? Get out of debt. Save and spend less than you make. Not sexy but it works!


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8 Comments:

Red said...

The fun part is saving and paying down debt because of perceived down times (economists might refer to it as hoarding) is one the major causes of depressions.

A fun spiral.

However, I'm with you, keeping debt down is a good thing.

RacerX said...

First- Welcome Red!

I agree about the fun part. I really like to imagine that every dollar breaks a link in the debt chain!

Thanks for visiting!

Fiscal Musings said...

I wouldn't say that I'm all doom and gloom about the economy and things, but I obviously agree with the save and pay down debt thing. Of course, this should apply no matter what state the economy is in really.

CatherineL said...

Balancing the economy is a tricky thing isn't it? I studied a little bit of economics and I must admit, I'd hate the job almost as much as having to take a wheelbarrow of money to buy a loaf of bread.

Dawn said...

Do you think all this, is just a karmic smackdown, to get people back to following the basics of personal finance?
It seems like so many have lost a grasp, of the foundation of building wealth!

RacerX said...

@Fiscal - Agree that this is the right plan of action. However the things that are going on should work as a bit of an alarm clock!

@Catherine - I think taking a wheelbarrow full of MY money would rank a bit lower ;) but tough gig for sure.

@Dawn- Maybe, but I just think it is a boom/bust cycle like the initial internet time. Anytime you see people talking about easy money...run!

Thanks all for visiting.

Just a quick note: I took down the Meme list post. I do support every one of those blogs getting more traffic, a lot of great work goes into them. But whether it is intended that way or not I believe it may violate the Google TOS. So I made the decision to yank it down

Debt Dieter said...

Interesting that here in Australia our interest rates are going up due to the economic situation in the US?

RacerX said...

I don't know if your Central Bank cut rates or not? Some US rates are still moving around as well, like Mortgage Rates!

Thank you for visiting!

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