Interest rates will rise sharply. It first started slowly as 2009 ended and with some fluctuation up and down, rates will keep rising. Why is this happening and how can you benefit by it or protect yourself from it?
It is happening because the U.S. government is running massive deficits, projected for years to come. To pay for these deficits without raising taxes, the money must be borrowed and the government is borrowing heavily.
The week of December 28th alone, the Treasury Dept. raised a record tying $118 billion dollars after a worldwide appeal for funds.
The dollar is backed by only the confidence people have in it and foreign creditors including China and Japan, already hold half of the Treasuries and they are nervous.
At the end of 2009, they demanded higher interest rates and got them and they will in 2010 and beyond. The government must pay it because it desperately needs cash.
How can you benefit? If you have savings, commit them for months, rather than lock in for years and in the months to come, you will be paid higher rates than the near zero you're getting now. If you are a borrower, take advantage of today's low rates and borrow long term fixed rate.
If you are an investor, look into highly reputable hedge funds that are positioning to capitalize on the higher interest rates to come.
From the government borrowing so much money and printing the additional funds it needs out of thin air, we will eventually be confronted with hyper-inflation and far higher interest rates.
I have nothing to sell you. The intent is to call this to your attention so that you can benefit by it and as need be protect yourself from it. We are all in this together and we will get through it and hopefully build a far better nation, one that takes fiscal responsibility seriously.
Dick, [last updated, 1/1/10]
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