We are currently, witnessing, a period, of time, with the longest, extended period, of historically, low, interest rates, in recent memory! While, there are many reasons, for this, it may be, beneficial, to better understand, the fundamentals, and relationships/ ramifications/ impacts, of this sort of prolonged, extended period. However, it’s also important, to recognize, since, we have never witnessed this, before, our concepts are based on theories, concepts, and apparent, common sense. Will interest rates, remain, this low, and become, the New – Normal, or, will, we, once again, see cycles, over – time? With that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, 4 questions, and whether, it will, in the longer – run, create undesirable ramifications.

1. Historic lows – How low, will rates go?: In the last year, or two, many have believed, we experienced, the lowest rates, only, to discover, they went, even – lower! Although, these are historic lows, how low, will they go? We observe mortgage interest rates, which have never been lower, in recent memory, and the impacts. In housing, it means, a buyer, can purchase, more house, for – his – bucks, because, it creates low monthly payments, etc. It also means, individuals, can qualify for bigger loans, because, their monthly expenditures, are a lower percentage of one’s overall income, etc. When, banks pay, such low – interest, and bonds, such, low dividends, it contributes, strongly, to the rising stock market, for a number of reasons, including, it being, the only game, in – town! However, banks and lenders, also, reap large profits, because, they still charge high rates, on credit cards, and, other, unsecured – consumer loans! It helps car dealers, because, especially, lease rates, but, also car loans, becomes more attractive!

2. Historically, rates fluctuate?: Will they do so, this time?: A review of historic trends, indicates, rates fluctuate, over – time. Since, they seem to have usually done – so, will this occur again, and, if – so, when? Since, the United States budget deficit is also, at a record – high, will that prolong, or reduce, this current period?

3. Relationship between rates and stocks: Because, when rates are low, using bank vehicles, or bonds, bills, etc, become less attractive, largely, because, they may not, even, keep – up, with the inflation rate, especially, in the long – term! Therefore, the stock market, usually benefits, because, many borrow cheap – money, and invest it, in stocks, and, it also, becomes, the only game, in – town!

4. If this continues, what will Federal Reserve use, as new/ future incentives. stimulus: Historically, the Federal Reserve, used lower rates, to stimulate investing, and/ or, spending. If this becomes the New – Normal, what will be the weapons, available, etc?

Will this become the New – Normal, or, just, a temporary, cyclical occurrence? The smartest strategy is to understand impacts, and be prepared!

Richard has owned businesses, been a COO, CEO, Director of Development, consultant, professionally run events, consulted to thousands, assisted with financial planning, and conducted personal development seminars, for 4 decades. Rich has written three books and thousands of articles. Website: http://plan2lead.net and LIKE the Facebook page for planning: http://facebook.com/Plan2lead

We understand that completely; nobody likes paying interest, neither do we. It’s an emotional hot button for any business person when financing equipment or acquiring working capital. They feel it’s like money thrown away into thin air… or is it? Interest is the price you pay when using someone else’s money to finance something. So why not pay cash and eliminate interest? When business folks say that to me I respond with, “if you have unlimited cash or if you have enough resources that paying cash won’t jeopardize your business cash flow then go right ahead”. I never argue that point because it’s an emotional one. But the warning should be clear; paying cash for something which cripples your ability to have capital for emergencies, market changes, market opportunities or expansion is not wise. If your market changes and sales slowdown, going to your bank and borrowing capital may prove difficult; it’s not going to be easy because traditional lenders are not risk takers and lending to a downward trending business is “risky”.

Financing assets along with paying interest allows you to preserve your capital and the longevity of your business. Of course the finance payment has to make sense; it has to fit within your monthly budget and the asset should contribute in one way or another to your bottom profit line. It should make you money or save you money. The third contribution is harder to measure which can be image and goodwill; if you’re a custom interior kitchen retailer then investing in a modern showroom for your clients to see your products can be invaluable and give you a high return on your investment but again that’s a little harder to put an exact number on. In any case, the finance investment still has to be manageable within your budget.

Though nobody likes paying interest, it has to be looked upon as simply part of your return-on-investment calculation to assure you are making the best use of your new equipment addition. How to get the lowest rate? Maintain your personal FICO as high as possible and get it repaired by a service if you get into trouble, review your D&B business profile and make sure it’s accurate, if any tax liens exist then establish a payment plan and have it documented and in place which shows you’ve taken the right steps to resolve them and finally have your financial statements prepared by a service, bookkeeper or accountant which will indicate you are organized and manage your business seriously. In the long run if managed properly, the finance interest you pay will actually pay you back.

AnalytIQ Group helps small to mid-size companies lease or finance technology related equipment and special projects nationwide. Get More Infomation: Here!

The second problem is that deflation slows an economy because people postpone their purchases.  For example, why buy a new car for $50,000 this year when the price will probably fall to $46,000 next year?  Why not just postpone your purchase until next year?  If enough Americans delay their purchases of a new car, the automotive industry will soon tank and tens of thousands of workers will be laid off.

Lastly, significant deflation usually comes with a contracting economy, layoffs, falling demand, and job insecurity.  Deflation can easily become self-feeding.

This is so important that I am going to say it again.  Deflation can easily become self-feeding.  A modern economy can quickly cycle down the drain.