Thursday, January 31, 2008

The Fed Cut Interest Rates Again; Prime Rate Down To 6 Percent

The Fed cut the key interest rates again yesterday, this time by 0.5 percent, following a 0.75 percent cut last week. For alternative investors that means a couple things:

1) The prime rate is now down to 6 percent, the lowest it has been in three years. Investors who are utilizing HELOCs and personal or business lines of credit are probably pretty happy right now, as borrowing is now much cheaper than before. Investors who were not utilizing this type of variable credit in favor of fixed rates are probably much less enthusiastic and might want to think about switching. The U.S. economy is not going to be recovering any time soon, so investors might as well take advantage of these low rates while they can. Chances are they will continue to go even lower before things turn around and the Fed starts hiking them back up again.

2) If you haven’t already started doing so, get out of the dollar now. What was left of the U.S. dollar was burned at the stake this week; the government has shown that they are willing to let the dollar die in favor of the chance that they might be able to fend off a recession. Things are likely only going to get worse though, as the U.S. is probably still going to see a recession, and inflation is going to start eating up people's U.S. dollar savings. If you want to learn more about the importance of the dollar's decline, see yesterday’s blog post: Ron Paul And The Fight To Save The U.S. Dollar.

If a recession does come, which it certainly appears it will, investors need to be prepared. There are profits to be made in good times, and even more profits to be made in times of recession--if investors know where to look. If you are trying to figure out some good places to put your money in the event of a recession, check out our Top 5 Recession Investments.

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