You are a business executive and you are looking at an investment loan. The loan is for one million dollars ($1,000,000.00).
You are about to close the loan when your banker tells you that he must raise the interest on the loan by ¼ percent. What do you do? Kill the deal or proceed with your investment.
If you are like me you would look at the numbers.
Your $1,000,000.00 would now cost you $2,500.00 more interest for the first year.
Now $2,500.00 is, on the one hand, a lot of money; but compared to what a million dollars can do when invested properly it does not appear to me to be a deal killer. Any business investment that could be killed by such a trivial amount is probably too risky to do in the first place.
Something is wrong in America. Whether the FED raises interest rates by a ¼ percent next week, or not, should not even be news worthy if there was not something very wrong elsewhere. Markets are affected in the long term by fundamentals, like interest rates; but in the short term they are driven by the mass psychology of the participants.
The problem in our financial system is not that ¼ percent increase in interest rates; it is the perception of what that change represents.
Perhaps it is a warning shot across the bow that we need to wake up and look at what we are actually doing with our finances. Debt matters. It must be dealt with at some point in time. And it should not take a genius to understand that the bigger the debt the bigger the problem.
We have been printing and spending money like a drunken sailor. It will eventually have to stop – that is a fact.
The only question remaining is when “eventually” will arrive. I do not know, but I sense that it is closer than we would like it to be.
So let’s make money while the sun shines and try to stack up a few silver coins for the last days of fiat money.
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