The Future of Interest Rates

So what do I think will happen with interest rates?

I think interest rates will go up. Currently they are about 5%

I think they will go up to 10%. by next year at this time.

Can I point to any fancy statistics that will support this?

No.

My gut feeling is based upon the fact that I don’t believe you can stop a train in 10 feet.

A train moving at 50 mph needs 1 1/2 to 2 miles to stop.

Unfortunately, the train of easy money that the Federal Reserve has given us for the past 10 to 13 years has been going at 90 mph.

This means that the train will probably take 3 1/2 to 4 miles to stop.

That’s not necessarily a bad thing.

It is what it is.

If it takes the train that long to stop, that’s how long it takes to stop

There’s no getting around that.

What this means is that inflation is not going to go away anytime soon.

Actions have consequences.

When you print money up like a drunken sailor, you will eventually get some measure of inflation.

The chickens are coming home to roost.

Now, with that said, I suppose it’s possible for the Fed to go back to easy money.

But if they do, it’s going to keep inflating the currency.

We need higher interest rates.

Quite frankly, we need much higher interest rates.

Nobody should be afraid of these higher interest rates.

Nobody should not buy a house because of higher interest rates.

When I bought my house and office in the mid-90s, I paid 10 to 11% interest.

My friend Garry, who had bought his house much earlier than I paid 14% interest.

It was what it was.

We paid the higher interest rates and then refinanced at lower rates as time went on.

What you can do as a young person in order to afford a house is to scale down the size and price of house that you are desiring to buy.

I certainly wouldn’t let higher interest rates stand in the way of the life that you want to lead.

The easy money that we had for the past 10 to 15 years was a mistake.

That mistake needs to be corrected.

That is not a bad thing.

That is a good thing.

If I were you, get used to the fact that interest rates are going up.

Take advantage of the relatively low rates now.

And, of course, never buy a variable interest mortgage.

Always lock in your fixed interest rate in perpetuity.

Well, that’s the way I see it.

Sincerely,

Archer Crosley