Only In America
Monday, March 20th, 2006
By Michael Lombardi, MBA for Profit Confidential
You’ve probably heard the rumors by now that Alan Greenspan will receive an estimated $8 million dollar advance for his yet to be unpublished book. To my knowledge, this is the biggest advance ever paid for a financial related book.
As a PROFIT CONFIDENTIAL reader, you’re also aware I’m not a Greenspan fan. In the years that lie ahead, I believe we (and our children) may pay dearly for the debt bubble Greenspan created during his tenure as head of the U.S. Federal Reserve.
By doing the unthinkable, lowering interest rates to their lowest level in 46 years during non-recession or depression times, the Greenspan regime enticed millions upon millions of Americans to borrow more money than they ever needed. In January, U.S. consumer credit outstanding was a whopping $2.162 trillion-and this didn’t include mortgages or other real estate secured loans.
Consumers just thought “what the heck, interest rates are so low, why not just go borrow some more and buy stuff I really don’t need (such as a second or third home)?” The U.S. savings rate continues to be near record lows and the average American consumer spends more than he or she makes, because they have some many debt payments to make each month.
Now, with interest rates rising so aggressively, consumers are being stretched. If inflation rears its ugly head, interest rates will stay high or higher. If the U.S. dollar starts to collapse because foreigners think we have too much debt, U.S. interest rates will need to remain high to protect the ailing dollar. Any way you look at it consumers will pay dearly for being so heavily indebted.
And for that, we can thank Greenspan. We can thank Greenspan because I believe if interest rated didn’t fall that low in the first place, consumers would have never been so enticed to borrow. The temptation would not have been so great.
So Greenspan is getting $8 million for this great work. Only in America, you could say.
PROFIT CONFIDENTIAL NEWS–Because we’re getting so many e-mails asking for more views and opinions on the Canadian economy, our “In Toronto With Global Eye” column by Laura Kupcis will now become “A Canadian Perspective.” Hope you enjoy this new feature. We’ll cover what’s going on economically in different parts of the world (if we think it can affect your investments here in North America) in our regular PROFIT CONFIDENTIAL columns.
Next Post: Japan Continues to See Sustained Growth
Previous Post: If You Were Building a Portfolio
Tags: interest rates, U.S. dollar
Tweet
Sign Up for PROFIT CONFIDENTIAL and
receive a FREE copy of our exclusive report:
"A GOLDEN OPPORTUNITY FOR STOCK MARKET INVESTORS"
We respect your privacy and
will never share your e-mail address.
Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
