Todays Mortgage Interest Rates - future Commodity Prices - Us And Its cheaper
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Compared to the past, the Us economy is much weaker today. Despite this, its policies are still geared towards solving its short-term problems instead of its inherent long-term weakness. Such myopia will lead the Us to an economic storm entertaining commodities. Let us now analyze the Us's force today, flaws of its policies and their eventual impact on prices of commodities.
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In disagreement to the 1970s, the incoming emergency for commodities will be more severe because the Us has increasingly lost its ability to growth the supplies of oil and other commodities. Also, the root of the request supply squeeze then came from politics while that for the emergency arriving will be related to its fundamentals, being harder to solve.
To add on, while the 1970s, a allowance in Us request for commodities was strong adequate to impact commodity prices. However, the Us can no longer do so because developing nations now consume more oil than industrialized countries today. Thus, even if industrialized nations sell out their demand, developing countries won't because their only way to grow involves the growth of request for commodities.
Today, developing nations have to grow because they want to sell out unemployment. Thus, given the conflict if interests between industrialized and developing countries coupled with a reduced sphere of Us influence, it will be hard for commodity prices to fall.
To make things worse, with the world having no more spare production capacity for commodities (since all are running out), we will be added threatened with a situation or rising commodity prices we cannot deal with. This is because we are sandwiched between rising request (to grow) and dwindling supplies (rising scarcity), both having the ability to rip economies apart as their magnitudes build up.
Furthermore, to sell out commodity demand, the Us must hurt itself first by engineering a recession and sell out consumption. However, it is unlikely to happen as Us debt levels as % of Gdp are higher today than that of the Great Depression. This is because the baby boom generation borrowed a lot of money to buy luxuries (especially homes) and necessities in the 1980s.
Moreover, government and company debt has been rising sharply. All these make it harder for consumers and businesses to pay off debt, reducing profits and in turn increasing unemployment and bankruptcies. Due to such unhealthy debt levels, the Us economy is more vulnerable than before and thus even the mildest recession can become vicious in a very short time.
Because of this susceptibility, the Federal sustain cannot originate a recession and sell out consumption to push commodity prices down because it will hurt itself more in this process. This will threaten its position of supremacy in the world as other nations being in better shape can rebound faster than the Us to take benefit of such changes.
In addition, given the high debt levels, the Federal Reserve's main goal today is to declare home prices as home mortgages make up the bulk of consumer debt. Compared to the 1980s, homes are far more leveraged today with home mortgages at 40% of home value against 27% then.
Because of this inherent weakness, any fall in home prices can growth bankruptcies and this will jeopardize the Us financial theory as this fall will pose a heavy threat to the survival of banks. The government's fear of recession has been clearly proven by the Federal Reserve's immediate performance to growth money supply and slash interest rates for the 2008 crisis. To make it more obvious, they bailed out Freddie Mac and Fannie Mac immediately as they carried more than 50% of Us home mortgages worth Us.4 trillion.
Thus, though the only way to sell out global commodity request is by creating a Us recession big adequate to spread to developing nations, it is very unlikely to happen because of the dangers it can pose. To add on, such a recession is hard to engineer and can indeed backfire if commodity prices only fall temporarily.
Hence, to conclude, given the few undesirable options ready for decreasing global commodity demand, commodity prices will rise in the near future unless countries are willing to hurt themselves to sell out the prices. With the low likelihood of such solutions happening, there is a rather high occasion for commodities to be a good bet for your future.
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