One of the all-time great lies is “I’m from the Government and I’m here to help.” In an effort to stimulate the economy and slow down the growth of foreclosures, the Federal Reserve has drastically reduced interest rates. While this doesn’t directly impact mortgage rates, it does affect the indexes that are used to calculate the adjustment of ARM loans. While the rate of growth in the number of foreclosures has slowed, there are other consequences of the rate cuts.
You may have notice a “slight” increase in the price of gasoline. A large portion of this price increase can be attributed to the falling value of the dollar in relation to other currencies around the world. When the dollar falls, the cost of imported goods rises. One of our largest imports is oil. The ripple caused by the interest rate cuts has led, in part, to the dramatic rise in the price of gas.
The increase in fuel cost has its own ripple effect. Have you been to the grocery store lately? Rising fuel costs have led to increased transportation costs. Since the majority of goods in this country move by truck, the cost of just about everything is impacted. There has also been an increase in the production of ethanol for use as fuel. This has caused the price of grain to rise, yet another ripple in the pond.
The small pebbles have turned into a tidal wave of trouble for our economy. Being an election year, everyone is so concerned with pointing fingers and looking for someone to blame. The truth is that we all played a part in the drama. It is also up to us to play a role in the recovery. Our economy is very resilient and our people have a way of bouncing back. Let’s do our part by getting our own financial house in order and making sound financial decisions.
For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a nail.
Benjamin Franklin (In Poor Richard’s Almanac)