Question
- Thread starter desertrat
- Start date
Railroad
Routinely Derailed
desertrat said:
Don't know what the smart folks will say, but my take is that rising fuel prices will drive up the prices of everything else, making people more inclined to borrow money to live as they have been living, instead of tightening their belts. Raising the interest rates dampens the desire to borrow and reduces the frequency with which we buy things when prices are high. Demand drops, then prices drop, then people buy again.
Just my guess.
StanleyRugg
New Member
I aint no economist and all but I read a book once and it said the economy was like a balloon. Sometimes it needs air and sometime it dont. Interest rates are like a float valve in your commode. When the float goes up in shuts down the water comin in, when it goes down more comes in. Cause of inflation sometimes the ballon gets too full and it might pop. Raisin the interest rate shuts off the air comin in.
We Ruggs don't believe in borrowin money. If you do that you are beholdin to the one who loaned it to you.
We Ruggs don't believe in borrowin money. If you do that you are beholdin to the one who loaned it to you.
The interest rate is just the price of money, so if you raise the price of money, people will buy less, borrow less, and it will decrease spending. All the feds do is make sure inflation doesn’t happen at some rapid rate and paralyze our economy, causing/forcing people to ask for higher wages to fill in for the higher prices on everything.
The thing is, many are in interest only loans on their houses and have HELOC's that will see massive increases in payments because of these increases. I have thought all along that we are going to see a mass amount of foreclosures coming up in the next year or so.
The thing is, many are in interest only loans on their houses and have HELOC's that will see massive increases in payments because of these increases. I have thought all along that we are going to see a mass amount of foreclosures coming up in the next year or so.
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desertrat said:
Good question. According to gov't figures, inflation is under control and not a problem right now, although there is concern that prolonged elevated oil prices will act like a tax increase would and slow down the economy. Right now, increased gas prices are just acting like an annoying mosquito, in as much that we are seemingly able to absorb the additional expense.
I'm not smart, either, but the Fed has been raising rates to temper economic growth. Not that growth is a bad thing at all, but they'd like to keep it at a nice even pace. By slowly increasing rates they are hoping to find the equilibrium point that will put the economy into a nice balance of reasonable borrowing rates with reasonable economic growth. If rates are too high, the growth rate slows as its difficult to get capital. If rates are too low, every Joe can get a couple hundred grand to try to buy whatever he wants and then you have too many dollars chasing too few goods and services (one of the reasons for the real estate boom). Rates were driven down during the last economic slowdown in 2001. Now they are coming back to a more realistic long term average value.
When the fed talks about inflation, they like to frame it in terms of the supply of money. When you and I talk about inflation we like to talk about the price of goods and services. Both act to decrease the value of the currency.
Larry Gude
Strung Out
The economy is smoking...
...along pretty hot and unemployment is very low. Throw in high energy costs and business will start adding it to their prices along with raising wages to get the people they need to continue rolling and add that to prices because they can get it right now. Energy and labor are short term costs because energy may go up or down and more or less people, bluntly, can be adjusted readily as well.
Now, in order to cool things off a bit, you raise interest rates. This makes business' rethink plans for new borrowing which may lead them to put it off for awhile, needing less people, needing less energy. People will put off
buying a new home or car.
The right number keeps things moving without inflation taking off. The wrong number slows business and people down too much. It's all a protection for people and business' that may not be able to just get higher wages or profits.
Don't call me smart but I do know how this works.
desertrat said:
...along pretty hot and unemployment is very low. Throw in high energy costs and business will start adding it to their prices along with raising wages to get the people they need to continue rolling and add that to prices because they can get it right now. Energy and labor are short term costs because energy may go up or down and more or less people, bluntly, can be adjusted readily as well.
Now, in order to cool things off a bit, you raise interest rates. This makes business' rethink plans for new borrowing which may lead them to put it off for awhile, needing less people, needing less energy. People will put off
buying a new home or car.
The right number keeps things moving without inflation taking off. The wrong number slows business and people down too much. It's all a protection for people and business' that may not be able to just get higher wages or profits.
Don't call me smart but I do know how this works.
bcp
In My Opinion
Larry Gude said:
This all adds up to a great year coming for my business.
People will have to cut back on their vacation plans due to fuel costs, they will not be willing to put the money into buying a new home.
they wont want to finance a vacation.
what does all this mean to me as a landscape company?
well, people tend to do things that make them happy, and allow for them to enjoy themselves, the money that they wont be spending on travel this year will be spent making their yards into a vacation spot for them. Much money is about to be spent re scaping yards.
if I keep my prices within reason, I am about to make some killer cash over the next two years.