Australia put up its key lending rate to its highest level in 11 years – at 6.5%. The US central bank left its key lending rate unchanged yesterday. It still talks about fighting inflation but it is more likely to want to fight deflation in the months ahead. We would not be surprised to see a rate cut this autumn.
Should you be worried about any of this, dear reader? Does it matter if the stock market goes down … or if it enters a new third phase of delirium?
Well, of course, there are bound to be financial and economic effects. But in our humble opinion, it is almost always best to stick to your own knitting. And it is especially important to stick to the knitting when everything seems to be unravelling.
When a society is stable and prosperous, you can cast your lot along with everyone else and prosper along with your neighbours. That was the situation in the United States and Europe after WWII. Almost everyone became richer.
But since the mid-70s…it has been harder. In America, for example, hourly wages of working men have gone nowhere. And since the money in which wages are paid has been cut loose from gold, it is hard to know what anything is really worth…hard to keep track of what you have…and hard to hold onto it. The dollar, for example, lost half its purchasing power during the short time when Alan Greenspan was chairman of the Federal Reserve.
More recently, the bubble economy of the 21st century has been rewarding certain groups of elite traders and financial mavens, while punishing the average person with higher debt – personal, mortgage, and governmental. Soon, average investors will be hit hard too…and average homeowners…and average consumers.
Markets and Money