With economic stimulus checks just starting to arrive in US accounts, the crunch still feels like it's on. Just half an hour ago the Federal Reserve cut a key interest rate by another quarter of a point, bringing the federal funds rate down to 2 percent - the lowest it's been since 2004.
This should mean lower interest rates on loans as banks lower their prime lending rate, which is what influences millions of loans for both businesses and consumers. It looks like this may be the last cut for the time being, but it remains to be seen how many Americans use this opportunity for good purposes. At a time like this, it's vital that we focus both our business and personal funds on eliminating as much debt as possible. Anyone with a loan or credit card affected by lower interest rates is now going to be able to make payments - especially extra principal payments - stretch much further. So if you've been discussing paying down that mortgage or credit card or vehicle balance, NOW is the time to really do it, rather than just talking about it.
With folks making the news because they have to sell off their Versace jeans and Dooney & Bourke purses, it's pretty obvious that Americans are facing the downside of this shockingly consumer-based society: wrapping your money up in things that are not easily turned into cash, with money that wasn't really in your pocket in the first place, leads to disaster. Mind you, I truly feel for the people who've lost their jobs and had good heads on their shoulders to begin with. But let the folks who "invested" everything in grown-up toys and fancy frocks be a lesson to the rest of us: pay cash, up front, because the rainy day may come sooner than you think. Some folks have been trying to cut costs, pay off debt, and live as good stewards of their money for months, years, or decades. All of us would benefit from such lifestyles now.
The same lesson can be taught to businesses. When the Fed is giving out a $30 BILLION loan so that one bank can buy another - well, we've really got to wonder about our society. And about our banks....
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