It seems like just yesterday we were told that the Federal Reserve would keep interest rates low for a while, that they could afford to be “patient.” Oh wait, that was yesterday! Although the Fed rate takes a while to trickle through to effect mortgage rates, mortgage rates are down too.
But there is a fly in the ointment. It seems that inflation is starting to rear its ugly head, buoyed by oil prices at $38 a barrel. Oil futures — bits of paper people buy to bet on or protect themselves from future oil prices — are at an all-time high. Remember, oil prices are at these levels because OPEC cut production levels, because the dollar is weak, which the Administration allows because they think it will help the trade deficit.
The other potential wrinkle is that low mortgage rates are contributing to a rise in housing prices. In some areas, it is more noticeable than others. Greed and speculation rule in some regions. This is aside from any consumer debt bubble which may exist.
The bottom line is that inflation is beginning. Yes, the food and energy sector had the highest rise. Oil prices will have an impact on the price of other goods you buy within six months. After all, as a friend of mine put it, “If you’ve got it, a trucker brought it.”
Alan Greenspan cannot be patient forever.
Finally, I’d like to point out that President Bush is probably sorry he told Kerry to put up or shut up regarding the endorsement of world leaders. Kerry has the support of Spanish Prime Minister-elect Jose Luis Rodriguez Zapatero, who says “We’re aligning ourselves with Kerry. Our allegiance will be for peace, against war, no more deaths for oil, and for a dialogue between the government of Spain and the new Kerry administration.” On the other hand, Mr. Bush has dragged down an endorsement from none other than Al Queda, in a statement which said “Kerry will kill our nation while it sleeps because he and the Democrats have the cunning to embellish blasphemy and present it to the Arab and Muslim nation as civilization. Because of this we desire you (Bush) to be elected.”
Which endorsement would you rather have?