I thought after I posted that, that my thinking would seems backwards.
What I'm conteding is that higher interest rates are (likely) a bellwether of inflation or coming inflation. Think the Carter years. Interest rates went through the roof yet prices were sky-high.
I went to Toy-R-us today and it cost me $40 for a puzzle, a DVD and 2 boxes of crayons - all made in China.
Ask yourself, despite high unemployment, crummy retail sales, low money velocity and failing businesses, in your neck of the woods, are you paying more for everything or less?
See what I mean?
Higher interest rates, because they are deflationary, can be used by central banks to fight inflation.
Interest rates have been lowered, however, worldwide because central banks are fighting deflation. Poorly.
The world is still stuck in a deflationary death spiral.
30 years ago a single video disk would have cost you $150.
Deflation.
High end shoes and suits are half off. Deflation.
Computers and watches are cheaper. Deflation.
Cell phones and phone service (Vonage!) is cheaper. Deflation.
Satellite TV is cheaper than cable. Deflation.
High speed internet is cheaper today than dial-up was in 1990. Deflation.
Homes are cheaper today. Rents are lower today. Salaries are lower today.
Deflation.
Wal-Mart sold $140 Billion worth of groceries in the past 12 months by being cheaper than grocery stores.
Deflation. Limes are 15 for $1. Ears of corn are just $0.27 retail.
Deflation.
You can download new release movies for $5, or rent all of the movies that you want to see each month (Netflix!) for $10.
Deflation.
Cars are cheaper, aircraft are cheaper, and boats are cheaper today than in 2007. Used and new.
Deflation.
Prescription glasses were $300 to $800 last year.
This year you can get them online from Zinnioptical.com for $30 to $80.
Deflation. Even airline tickets are cheaper this year. Deflation.