Warning: Many of your fellow citizens these days are quietly rooting for interest rates to keep rising.
Though they may not noise it around, they'd be happy to see the Federal Reserve continue to tighten credit, even to the point of slowing economic growth and restraining the number of new businesses and jobs.Who are these anti-growth Scrooges? Well, chances are their numbers include at least some of your affable, law-abiding and patriotic neighbors - and maybe even you.
You would certainly qualify for inclusion in this group if, for instance, you have a fixed-rate mortgage on your house, which would be unaffected by any change in current interest rates, and a chunk of your savings in a floating-rate investment such as a money market mutual fund.
A decade or two ago, it was generally agreed that only a banker could love high interest rates. While the costs of borrowing went up, savers got little benefit, since the government set limits on rates paid to depositors (as in the fabled 51/4 percent savings account).
But in the modern world of deregulated finance, all that has changed. People who are fixed-rate borrowers and floating-rate investors see their incomes rise as interest rates go up, with no concomitant increase in their expenses.
This viewpoint is by no means a unanimous one. Families with floating-rate mortgages right now are bracing for a blow to their checkbooks the next time their monthly payments are recalculated.
The impact is even more immediate on borrowers who have flocked to the popular home equity loans in the past few years.
With much home-equity credit, the interest cost goes up in lockstep with the prime lending rate, which jumped a full percentage point in February alone.
Also, owners of long-term interest-bearing investments such as bond mutual funds have seen the value of their principal eroded as higher rates have pushed bond prices lower.
Holders of bank certificates of deposit, meanwhile, watch in frustration as the rates available on new CDs climb well above what they are getting on existing deposits that won't mature for another six months, a year or more.
Still, long-term rates have risen much less than short-term rates in the past year or so.
"In periods such as 1988 when short-term interest rates rose while long-term interest rates remained stable, the household sector did very well," observed Richard Hoey, chief economist at Drexel Burnham Lambert Inc.
"This pattern has been modified but not eliminated by the rise in floating rate debt instruments (such as mortgages and home equity loans) in recent years."
As savers and investors get more and more experience with the vagaries of interest-rate fluctuations, the people who create and sell financial products keep devising new approaches to the situation.
The floating-rate CD, in various forms, is one prominent example in the banking world.
A case in point among mutual funds is the Pilgrim Prime Rate Trust, an investment company sponsored by the Pilgrim Management Corp. of Los Angeles.
It is set up to seek a monthly yield that fluctuates pretty much in line with the prime rate, by investing in pieces of floating-rate bank loans known in the trade as "loan participation interests."