Interest rates will be going higher!  Just think about it, as states and countries find themselves in budget deficit, they will have to pay more to borrow money because of the slippage in their ratings.  This leads to higher interest rates all around as people value risk more carefully.  The thought being that if the states and countries have to be bailed out…..oh we forgot, refinanced, that cost will be borne by the larger entity, here in the states, it is the government, in Europe it is member of the European Central Bank.  We have seen wealthy countries bail out their poorer, more leveraged relatives, case point Dubai.
 
Here in the states we, the home owners, find that our real-estate taxes are increasing.  House values continue to retreat and yet, we must pay more in real-estate taxes.  Why, because we are paying for those neighboring homes that have gone into foreclosure.  Crime is on an up-tick.  Even on safe streets, we have an increase in break-ins and robberies as the desperate become more desperate and brazen.  What is to be done?  The world is becoming a less friendly place to work in and to live in. 
 
People today, who are employed, continue to have trouble making their bills.  The tax increase felt by the increase in real-estate taxes along with high utility bills and other increases are causing the steady earner to fall behind.    Credit card companies, instead of understanding that some money is better that no money on a bill, are recklessly raising the rate that they charge on their cards.  One of our cards  is charging almost 26%!  Naturally, we will be closing that account permanently. You would think the financial wizards that run the credit card companies would understand that higher rates on already stressed balances will likely lead to default which will lead to additional write-downs on their financial statements.  Why not reduce interest rates on the cards so that the balance can be paid.  It seems like moronic behavior, wonder why people are getting into credit card trouble, look at the way those companies are run.  So where is the spending going to come from?  Certainly apparel is cheap enough and electronics seem to be cheap as well, but with the current flock of cost increases just to live, who can afford a new outfit or another gadget that you really don’t need?  
 
What impact will all this have on inflation? I suspect once rates move up, so too will inflation, which should be supportive for commodity values. However, the transition will apt drive prices lower as we move from low to higher rates and that may take a while.