If you ask anyone about our current economic situation, inflation and rising interest rates are top of mind. Filling job vacancies and supply chain challenges persist but many businesses are seeing some relief from earlier inventory woes. For businesses, higher fuel prices directly impact employees who do not have the option to work remotely, and employers with fleet vehicles or companies dependent upon frequent delivery of perishable or in-demand items, are all experiencing higher expenses.
Borrowing costs are rising too but for a little perspective on that, we should refer to the early 1980s. Mortgage interest rates at that time hovered around 18% and businesses with frequent borrowing needs suffered greatly. This was at a time when international competition was not as great as it is today, so many companies were able to hang on.
While rising borrowing costs are a worrisome factor today in relation to what we experienced over the last several years, we need to keep perspective and know that 5% looks a whole lot better than 7% or 9%. Let’s hope we don’t go there or higher, but the reality is the possibility exists. Just go ask anyone who remembers borrowing in the early 80s.
