Bernanke Predicts the Future!

Fed Chairman Ben Bernanke predicts the future in a opinion article in The Wall Street Journal today. Mr. Bernanke goes to some detail explaining how he is going to suck out the liquidity sloshing around in the economy. It makes quite a bit of sense. I can see how the next phase of the economy might play out.

Bernanke Predicts the Future

The bottom line of the Fed’s exit strategy is that interest rates are going to start rising as they remove the liquidity from the financial system. Just as low interest rates are in effect right now, so will higher interest rates once the cash is removed from the banking system.

Entrepreneurs and CFO’s should be projecting every increasing interest rates over the next three to five years. When structuring partnerships or equity arrangements allow for much higher interest rates to be in effect. You might consider putting a ceiling and floor on interest rates with lenders or investors.

Bernanke Predicts the Future

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One Response to Bernanke Predicts the Future!

  1. Anonymous July 27, 2009 at 12:37 pm #

    Adding ever increasing interest rates presumes that projects can get fully financed. As a first step I would focus on projects that require lower level of financing especially if liquidity is going to be wrought from the system. Also, variable-to-fixed interest swaps to manage interest rate risk can be expensive.

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