Interest rates

For most of the last century the Fed Funds Rate was above 5% and often far above that. Then in 2007 it started down and was less than two percent until this past year and most of that time it hovered just barely above zero. For the past 15 years people have enjoyed the benefit of almost free money. The banks could get money at less than one half percent so they could make a handy profit with 2% loans. The hay day of almost free money is over and now inflation has become the problem. In time people will adjust to the higher rates and borrowers will once again start investing. During the years of low interest rates the Fed was creating money in a process called quantitative easing (QE). Between 2007 and today the money supply increased from $5 trillion to $22 trillion and now the Fed must reduce that which adds to the inflation problem. The Fed is letting $90 billion per month roll off of its balance sheet meaning the Fed is reducing the money supply by that amount. The governments interest payments on its debt will increase from $400 billion per year to $1.2 trillion just because of higher interest rates. The good times are over and it is now time to pay the piper.