Читать книгу Horse Economics - Catherine E O'Brien - Страница 26

According to the Federal Reserve (the Fed), the total amount of debt owed by consumers in the United States (credit card debt, car and personal loans—but not mortgages) has doubled in the last ten years, and toward the end of 2003 reached $2 trillion. At the same time, the nation’s savings rate has gone down considerably.

Explanation of items on worksheet:

Paid during the month of March: a $450 quarterly automobile insurance payment; the veterinarian ($100 for shots); and $180 worth of pet medications. The total of this household’s special bill-paying account at the end of March should be $1,998.

The Effect of Interest Rates

During 2003, the Federal Reserve reduced the benchmark federal funds rate^♦ to the lowest level in over 45 years. As of December 2003, the funds rate was 1 percent, which many hoped to mean the continuance of lower interest rates on many types of loans for consumers and businesses. However, during 2004, the Fed started to tweak rates upward. Why? Because of a change in the demand for money. And, it seems forecasters and analysts are divided as to whether the economy may face a significant increase in inflation in 2006 and beyond. Further, there is a large federal budget deficit that appears as though it will continue to increase in the years to come. A budget deficit is a sign of instability in both individual business and government. It is viewed as a credit risk, and riskier borrowers are charged higher interest rates by lenders and investors. The federal deficit, therefore, sets the stage for future increases in interest rates.