81–90 of 236 posts
Given that mortgage rates recently rose past 6%, seems to me this latest rate increase is going to put strong pressure on house prices. The rate has a huge impact on the monthly payment required to service a loan, more so than is immediately apparent without doing the math.
I'll echo what some folks have said in other threads, we've had rates down near zero for fifteen years, and we've got to get them back somewhere near historic normals at some point. If only so they can be cut again during the next crisis. How much is our entire culture the result of cheap money?
Rates are a shitty stimulative tool. Here's Bernanke in 2012:
https://www.theatlantic.com/business/archive/2012/12/ben-ber...
Low rates help people with money borrow more cheaply, accrue more wealth, and kick bankruptcy cans down the road indefinitely. It also royally screws over your average saver and pension fund who's forced to take on more and more risk for any sort of meaningful return.
I'll echo what some folks have said in other threads, we've had rates down near zero for fifteen years, and we've got to get them back somewhere near historic normals at some point. If only so they can be cut again during the next crisis. How much is our entire culture the result of cheap money?
>How much is our entire culture the result of cheap money? Only the parts involving housing, education, transportation, employment, and investments.
1) Federal loans do not have limits on amount.
2) Loans are non-discharged (you can't shed them in bankruptcy).
3) There is no intensive for schools to charge less. (schools likely should have skin in the game if borrowers end up shedding debt through time expiration or bankruptcy).
4) Loans or the amount of the loans are not weighted at all by the future prospects of the person.
I have other issues with college today. They weren't originally set up for getting people trained for work, but many people now look at them as a form of trade school. But many of the majors available aren't actually job training in any fashion. Most people would be better served by trade schools or apprenticeship, but the US hasn't figured out how to do this well yet. This is more of a cultural problem, that I hope employers can figure out. Coding bootcamps seem to be an answer for the software industry, but we need to push more people that way, rather than college.
This wont help inflation, interest rates are still effectively negative when inflation is considered. What it will do is rise i interest payments on the US sovereign debt very significantly. The US has two options, as far as I can tell. 1. Slash govt. spending (entitlements and defense) and rise taxes on the laptop class (that's us folks!) 2. Accept structural inflation and high interest rates. The Dollar dominance i…
Are rates for investment companies also affected by this? Like if a company wants to buy 30-50 houses to rent out, do they borrow at a similar rate?
Yes
> Like if a company wants to buy 30-50 houses to rent out, do they borrow at a similar rate? [... to regular mortgage borrowers]
Typically no
This wont help inflation, interest rates are still effectively negative when inflation is considered. What it will do is rise i interest payments on the US sovereign debt very significantly. The US has two options, as far as I can tell. 1. Slash govt. spending (entitlements and defense) and rise taxes on the laptop class (that's us folks!) 2. Accept structural inflation and high interest rates. The Dollar dominance i…
The dollar survived the Great Depression, Bretton Woods, the oil supply shocks, the abolition of the gold standard, political games of brinkmanship over the debt ceiling, the War on Terror, the Great Financial Crisis, the Volcker shock, and Covid. The dollar's supremacy isn't going anywhere.
On a related note, since mid-April, the Fed has withdrawn –$140B of liquidity from the financial system: https://news.ycombinator.com/item?id=32929454 and earlier this year announced that it plans to continue withdrawing liquidity from the financial system at the rate of $90B/month for the foreseeable future. The innocuous term for these withdrawals is "quantitative tightening." There are no historical precedents for…
To be fair, wasn't this preceded by 'quantitative easing' which itself had 'no historical precedents?' Like, it's in proportion to the last big thing we did, albeit in the other direction. I'd argue that's pretty close to precedent.
Japan has been at it for a long time: https://research.stlouisfed.org/publications/economic-synops...
But AFAIK there's no historical precedent for persistently going in the other direction at such an insane scale.
Earlier quoted context omitted.
QE was ended in March, and we're in full QT now.
Ended; but there's still about $8T on the books of past QE right? https://www.businessinsider.com/personal-finance/quantitativ...
Yes, about $8.8tn [1]. The Fed is running them off at about $60n a month [2]. (The Fed's optimal balance sheet is estimated to be around $4tn [3].)
The elephant in the room is the Fed's mortgages [4][5]. Those will have to start being sold soon, since rising rates mean mortgagers aren't refinancing and thus a run-off strategy doesn't reduce holdings.
[1] https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
[2] https://www.federalreserve.gov/newsevents/pressreleases/mone...
[3] https://advisors.vanguard.com/insights/article/thefedsplanto...
[4] https://www.ft.com/content/1a2e829e-de82-4083-abcb-ceeb46a45...
The problem with cash is the ONLY way you are getting that 3% yield is if:
1. you stay in cash for a whole year , 2. and the fed does not lower rates again
This is why bond ETFs have so much lag and are not as good. They still have old bonds on their book which pay worse, so you are getting maybe a 2% yield instead of 3%. You are better off just buying bonds from the treasury and getting the full amount.
Given that mortgage rates recently rose past 6%, seems to me this latest rate increase is going to put strong pressure on house prices. The rate has a huge impact on the monthly payment required to service a loan, more so than is immediately apparent without doing the math.
Given that mortgage rates recently rose past 6%, seems to me this latest rate increase is going to put strong pressure on house prices. The rate has a huge impact on the monthly payment required to service a loan, more so than is immediately apparent without doing the math. People keep hoping or expecting this, yet prices keep going up. As long as wages for top earners keep rising, so will demand in expensive areas.…