Inflation and Interest Rates Soar

                                                                                         

Over the last few months, a staggering rise in food and energy prices combined with what many consider to be a much too weak dollar have pushed up the inflation rate to its highest level in many years, already reaching 4% in the first six months of 2008 (inflation rose 4.1% in all of 2007, and that was considered high). Although in the United States the real world price factors that are contributing to the rise in the overall inflation rate are contained within the food and energy industries, that's not much comfort for people buying groceries, gasoline, and heating or air conditioning for their home. Higher transportation costs have partly been to blame for the rise in food prices.

Some economic commentators have noted positively, however, that the Federal Reserve and its Chairman Ben Bernanke are aware of their own monetary policy mistakes of the 1920s and 1930s with the Great Depression and again in the 1970s, which experienced caused the dreaded "stagflation" throughout most of the decade, where sluggish economic growth was accompanied by very high inflation. By being more careful not to do anything extreme or drastic to interest rates, the Fed is attempting to contain the national inflation rate and let the market forces driving it make their own correction.

Princeton economist Paul Krugman feels the Federal Reserve has definitely learned from past mistakes. Krugman stated " During the Great Depression, the Fed was only concerned about protecting the nation's gold reserves, and the federal government believed that austerity and cutting spending was the answer to recession. I think we know more now than we did then and just the fact that we have a big federal government is a stabilizing factor. But the current problem is still pretty awesome."

The U.S. Congress continues to drag its feet over legislation to free up much more territory for private oil and gas company's exploration and drilling while at once giving what many realize are perverse incentives to literally burn up our food supply to power our cars. None of this will do anything to ease energy and food prices.

Mortgage Rates Also Up

As if inflation concerns aren't enough for many people, mortgage interest rates are at their highest level in nine months. The housing market bubble, driven by long-standing government mandates for creative loan packages intended to get practically every American adult a home of their own, burst about a year ago. With lenders and their investment backers losing loads of money hand over fist as people across the nation defaulted on their mortgages and lose their homes, lenders' purse strings have tightened. It's now harder to qualify for a mortgage than it was just one year ago, and if you do get one you're likely to pay for other's mistakes through higher interest rates.

Government-backed mortgage company Freddie Mac reported on June 19th that 30-year fixed-rate mortgages averaged 6.42 percent. One year ago that rate averaged just 6.08%.

What it all adds up to for the average American is that the cost of living has gone up noticeably, and it may continue to do so for some time.

About the author:
Mike Sweeney is the founder of http://www.LionSaves.com , a leading mortgage refinance calculator that focuses on consolidating debt and gives anonymous quotes.

Article Source: http://www.Free-Articles-Zone.com