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The Era of Very Low Inflation and Interest Rates May Be Near an End

nytimes.com

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Re: The Era of Very Low Inflation and Interest Rates May Be Near an End

#211

Post by Retric »

shostack wrote: post #172
Retric wrote: post #31

Earlier quoted context omitted.

It also made the idea of a starter home more meaningful. Your monthly payments quickly became meaningless especially if you got any kind of a promotion. At 5% inflation if you pay 1000$/month in year 0 it feels like 614$ / month in year 10 and 377$ / month in year 20. At 1-2% inflation the loss of the interest tax deduction over time as you pay more principle and less interest means home lone feels about as expensive…

Right, but isn't the distinction that you are paying principle, which in essence buying equity? It isn't free cash flow, but there's a big difference between putting money towards principle and paying a bank interest.

I am not saying it's reasonable or unreasonable for home interest to be tax free. Just that the difference impacts your disposable income.

Re: The Era of Very Low Inflation and Interest Rates May Be Near an End

#212

Post by icebraining »

lowdest wrote: post #88
rmrm wrote: post #65

In a world where inflation is going to go up, what should one invest in? People will often say gold. Which I guess is a proxy for any fixed supply asset. But weve seen price inflation in many things other than gold, such as houses and land, art, stock prices. Most things of lasting value ie not consumables. Does a precious metal have some other special qualities that make it behave poorly relative to other limited va…

Get a mortgage (or otherwise use dollar debt.) The dollars that you owe will shrink.

Fixed-rate mortgages aren't common everywhere.

Re: The Era of Very Low Inflation and Interest Rates May Be Near an End

#213

Post by ataturk »

shams93 wrote: post #188
simonh wrote: post #186

Earlier quoted context omitted.

That just puts the crush on the sectors that Offer low wage jobs, increasing their costs and the prices they must charge their customers. The people who do get those jobs earn more, but there will be fewer of them, making the poverty trap even deeper. I’m beginning to think a low Basic Income might help, maybe as little as a hundred bucks a month. The problem with current BI tests is they are Big Bang experiments - b…

If we stop running a military empire we probably have enough peace dividend to provide a $45,000 a year BI that would truly make a difference. To do it we have to end standing armies and let all of the non-violent offenders out of prison. We would have to make deals with all the other countries to put an end to standing armies as a thing and use the UN to cooperatively resolve conflicts. The amount wasted on the mili…

Finland has already abandoned their UBI experiment. My gut tells me UBI systems just won't work. Helicopter money is kinda ugly, anyways.

Re: The Era of Very Low Inflation and Interest Rates May Be Near an End

#214

Post by mistermann »

tedsanders wrote: post #126
mistermann wrote: post #97

Earlier quoted context omitted.

Ok this is getting ridiculous, I'm very curious what motive someone would have for downvoting this (other than my username). What is there to disagree with?

My hypotheses for why your comment was downvoted: * Only two sentences * Not relevant to the main topic of discussion * Makes a vague claim * Unsubstantiated by any source * Claims that authorities are lying without specifying the particular authorities or particular lie * Uses a mild swear word * Resorts to cliche * Doesn't teach the reader anything new or interesting * Doesn't reflect any nuance or thoughtfulness N…

> Only two sentences

As are many other comments in that subthread. Is conciseness against the guidelines?

> Not relevant to the main topic of discussion

Whether inflation is also understated in Canada and correspondingly low interest rates and their effects is not related to the topic of "The Era of Very Low Inflation and Interest Rates May Be Near an End", as well as the content of the rest of the sibling comments in that subthread?

> Makes a vague claim

False.

> Unsubstantiated by any source

As with most other sibling comments, and not uncommon at all on HN, and also not a violation of guidelines.

> Uses a mild swear word

Wow. https://en.wikipedia.org/wiki/Lies,_damned_lies,_and_statist...

> Doesn't teach the reader anything new or interesting

You assume all readers are familiar with the interest rate and housing price environment in Canada, as well as the fact that inflation numbers are highly suspect? Possible I suppose, but what evidence do you have for this belief (assuming I haven't misunderstood)?

> Doesn't reflect any nuance or thoughtfulness

Perhaps I'm not aware of the nuance, and for that I apologize. I would appreciate if you could point out some of the nuance so I can learn.

> Anyway, I hope you don't feel bad about the downvotes.

I feel bad if the objectivity of the community is decreasing.

> For some reason, it seems the topic of economics brings out a lot of ill-informed speculation presented as fact.

While I didn't link to supporting evidence (I tried to find the "smoking gun" that I'd read before, but could not) have supporting, my words are an understatement of reality if anything.

Also, note that despite disagreeing with you, I upvoted you for actually contributing positively intended criticism, which I appreciate.

Re: The Era of Very Low Inflation and Interest Rates May Be Near an End

#215

Post by djrogers »

gibybo wrote: post #143
toomuchtodo wrote: post #130

Earlier quoted context omitted.

Almost no US mortgage products are assumable.

All US government home loan programs are assumable (FHA, VA, and USDA). This Quora answer indicates that FHA loans alone alone make up a majority of new home loans in the US: https://www.quora.com/What-percentage-of-US-home-loans-are-f...

While they make up the moajority of new home loans, they only make up ~15% ot total mortgage originations, leaving 85% of homes being mortgaged with conventional mortgages.

Re: The Era of Very Low Inflation and Interest Rates May Be Near an End

#216

Post by autokad »

samsonradu wrote: post #199
autokad wrote: post #178

Earlier quoted context omitted.

funny? when housing markets collapse, the economy goes down and people loose jobs. when you dont have a job, you cant buy a house. one of the many reasons why housing market collapses are not refered to as affordable housing. don't need to look further than 2007-2009 to see an example of this. You can see here that home ownership did not go up: https://en.wikipedia.org/wiki/Home-ownership_in_the_United_S...

> when housing markets collapse, the economy goes down and people loose jobs. I believe the causality goes the other way around. Economy goes down, people lose jobs and then the housing market collapses. It's funny to keep a bubble inflated to protect people from their mistakes. People always get overleveraged (encouraged by the government and the banking sector) to buy real estate when the economy is doing fine, wha…

it does go both ways, but drops in housing price also cause the economy to go down. like a lot. This is already a well established fact

Re: The Era of Very Low Inflation and Interest Rates May Be Near an End

#217

Post by djrogers »

kazinator wrote: post #110
mhewett wrote: post #66

Earlier quoted context omitted.

History. In the late 1970s you could get 17% return on your savings account and mortgage rates were well above 10%. People still bought houses.

If someone barely qualified for a mortgage in a 2% environment, and now suddenly is faced with 10%, that's a bit of a shakedown.

Nobody, anywhere, ever, in the history of this topic, has suggested the fed would raise rates such that rates would 'suddenly' jump to 10%. That's the straw-iest of straw-men.

Re: The Era of Very Low Inflation and Interest Rates May Be Near an End

#218

Post by ataturk »

SamBam wrote: post #208
matte_black wrote: post #3

I'm not familiar with a world where interest rates and inflation aren't low. What should I expect?

All of a sudden the idea of having a "savings account" along side your "checking account," and buying "CDs" will make a whole lot more sense. The average savings account interests are currently around 0.02% APY. Those kinds of numbers make savings accounts meaningless--people just use them as a second account to help their budgeting. CDs are not much better, at 2.5% for a 5-year. Compare that to 8% APY for savings ac…

Sometime in the early '90s I remember my GF's dad boasting about a 5-year CD he got with a 15% rate. Yeah. It was a weird time and I don't feel like it was a very prosperous time.

California had a major housing bust in the early '90s. The Clinton years kinda sucked, honestly.

Re: The Era of Very Low Inflation and Interest Rates May Be Near an End

#219

Post by djrogers »

harry8 wrote: post #159
tunesmith wrote: post #137

Still having trouble figuring out of being a landlord of a second home is good or bad in this environment. You owe a fixed-rate mortgage, and you're charging rent.

If the real value of the residential property in future sale price and rent received goes absolutely nowhere. Having it mortgaged will cause you to win big. Stupid example, say inflation goes to 7% year on year. Your house is say $100,000 totally financed by debt. You pay interest only on your loan. 10 years time, your loan is $100,000 and is worth $50,000 in 2018 dollars due to the inflation. If you have a 0% real r…

That completely ignores the downward pressure on home prices that a high interest rate has. Inflation at 7% would be tied to significantly higher interest rates, which would reduce the buying power of potential buyers, which reduces home prices.

Leaving aside all the mechanics of timing the market such that you have a huge, low interest, fixed rate mortgage in hand when inflation magically jumps to 7%.

Re: The Era of Very Low Inflation and Interest Rates May Be Near an End

#220

Post by kirubakaran »

ganeshkrishnan wrote: post #190
shams93 wrote: post #188

Earlier quoted context omitted.

If we stop running a military empire we probably have enough peace dividend to provide a $45,000 a year BI that would truly make a difference. To do it we have to end standing armies and let all of the non-violent offenders out of prison. We would have to make deals with all the other countries to put an end to standing armies as a thing and use the UN to cooperatively resolve conflicts. The amount wasted on the mili…

Unfortunately this is just wishful thinking. This is not going to happen anytime soon; maybe not in our lifetime. This does not mean we should not work towards it

Europe went from World War II to Schengen agreement in 40 years.
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