The current age is one of extreme short term thinking. Americans have always been known for taking the short view, but today our culture is built around a “live for the moment” attitude. Sit in a business meeting and exactly no one talks about downstream possibilities. It is all about this month, this quarter or, for the sprinkling of long term planners, the remainder of the year. You see this in our politics, where everyone reacts to the latest polls or latest news event. We are a high time preference society now.

This is why immigration reform is proving to be a non-starter. The Left side of the political class sees nothing but opportunities to rig the next election with foreign ringers, so anything that interferes with that is blocked. The Right side is wholly owned by the cheap labor lobbies, who like the idea of disposable labor. It’s not that the people in charge think their grandchildren will be exempt from the ravages of mass migration. It’s that they are unable to think past the moment. For our rulers, tomorrow never comes.

Just because the people in charge have no interest in the future does not mean the future is equally disinterested in us. That’s what will make the coming years interesting, with regards to the economy. The Fed has finally begun the process of tightening the money supply, after a decade of an extremely loose policy.That means rising interest rates in the US and a strengthening dollar, relative to other currencies. This is not going to happen overnight, but the Fed is going to move quickly now that there are signs of real inflation.

The trouble is s big chunk of the economy have become addicted to cheap money. Take a look at the car business. Every car maker has setup special lending facilities so they can entice buyers. Instead of figuring out how to make cheaper cars, they offer near zero interest and extended terms. You can get from most makers a seven year term on a new car, along with a super-low interest rate. They may even offer cash back you can use for the down payment. There’s even sub-prime lending at the lower end of the market.

Now, the Feds are not bringing back 1970’s interest rates and they are going to move slow. Still, it has been a long time since interest rates have been close to historic averages and that means most people making decisions don’t know what it is like to live in that world. It has been 18 years since mortgage rates were above seven percent. It’s been 27 years since we saw eight percent rates. It’s been a decade since rates were above five percent. In other words, the world has become used to historically low rates.

It’s not just the retail end that will have to come to terms with a world of rising interest rates. Most business runs on credit these days. The bigger the business, the bigger the debt burdens. US corporation have $4 trillion in debt that will roll over in the next five years, according to industry analysts. What this means is their debt service will increase as they refinance old debt with new, more expensive debt. That’s how corporate debt works. Most of it is fueled by bonds, so new debt pays maturing debt plus interest.

Of course, business is not the only institutions relying on cheap credit. Governments around the world have come to depend on the endless appetite for sovereign debt to keep borrowing rates low. When central banks take money off the street, it means there is less money to chase after sovereign debt. Healthy debtors like the US government will not feel the pinch, but the struggling countries in Europe and South America are going to find it more difficult to sell debt. It may not take much to topple a country like Argentina.

Again, the Fed is not bringing us back to the 1970’s. Baring some inconceivable catastrophe, no one reading this will ever see double-digit interest rates again. It’s just that since the end of the Cold War, America has been living with historically low interest rates and it has changed the nature of our economy. Cheap credit makes short term deals more viable and more common. It also increases risk taking. The result of all this cheap money is an economy that lives for the moment. Everyone is in it for the quick buck.

In theory, the slow gradual return of interest rates to something close to historic norms should not have a big impact. Almost thirty years of super-low rates, means most of the institutional knowledge about working in a normal rate environment is gone or heading for retirement. That means a lot of people are going to have learn the hard way about how business and finance works in a less than free money era. Therefore, no one can really be sure what is going to happen as the Feds slowly raise rates over the next years.