A rather long title but a biblical truth that is worth repeating. The Indonesian government just pleaded with the U.S. Federal to get going with their planned interest rate increase. The dithering on the Fed's part is creating uncertainty and collateral damage to confidence in the emerging markets. And Indonesia has been one of the unfortunate victims to the Fed's insouciance.
For those who are on leverage, especially in "big ticket" items like property mortgages, you will have started to feel the creeping pain from the rising interest rates imposed on your loans by your still friendly bank. One phenomenon you will soon experience is that no two interest rates are equal.
Your cost of borrowing will be moved up at a much faster pace than the slow upward adjustment in deposit rates. The "spread" that is the difference between the loan rate and deposit rate will be wider than the Suez Canal, and sadly, unless you happen to have much spare cash lying around, you are held hostage to paying the higher cost.
And like oil to boiling water, if you happen to be borrowing on top of your needed mortgage for extra funds to invest in the still popular high yield high risk bonds, you could be part of the sequel to "Subprime 2008"
Back in October 2008, many who borrowed to invest in structured products known as accumulators ( colloquial term "I kill you later") suffered great financial losses.
Why? Not because the underlying investments were totally worthless, but rather your once friendly lending bank decided that they were near zero value as no one wanted such investments on that fateful Oct 2008. Coincidentally that day was Deepavali, the festival of lights, though for many, it was total darkness.
It is late but not impossible to free yourselves from the chains of usury☔️
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