The Economy

You're only selling now if you have to move. Or you're just cashing out. Otherwise, why would you move if you have a low interest rate in exchange for today's rates?

 

My parents did that 10 years ago in SoCal, moving out of their home of 30 years. Then they cashed out of there three years ago and did an all-cash purchase in Idaho. No mortgage for the past 18 years. When I go up there for Christmas I'll ask them about their property taxes in Idaho vs. their Prop. 13 taxes they had in Cali.

 

And not taking on a mortgage.

I know I'm not selling and giving up my 2.65% for a 7.05%.

 

@BTExpress has been essentially right in some of his posts. Stock indexes -- like if you own an index fund -- have been blown up like a hit air balloon - artificially. But the dollars you earn have been destroyed to make that happen -- it's been over a very long period of time. This is all Federal Reserve driven.

And the markets sniffed out a bunch of things after a while of their rate-hiking cycle, which is why the hot air is back to being pumped in:

1) Things were going to break (and they still might, because the effects filter through with a serious lag) due to even just slightly higher rates -- zombie companies, overindebted consumers, highly leveraged real estate, etc. -- and the minute there is trouble, the Fed always steps in to artificially prop things up (which just kicks the payback down the road and hurts our economy and creates wealth inequality), which means looser and looser financial conditions. We were at that point. They have been raising their overnight rate, which has a real effect on people. But at the same time, they do things that counter the effects of it -- which most people don't understand. For example, banks started to fail -- Silicon Valley Bank, Signature, etc. -- and thousands more would have failed. So they put in a lending facility that allows those banks to exchange their underwater treasury holdings (that are underwater because of rates rising) for money -- at par (not at the actual value of the bonds; it's a scheme). That undid a significant portion of the effects of the overnight rate increases, because it keeps money artificially flowing into the economy through the banks. That lending facility was supposed to be for just a year. Everyone knows it is going to be permanent. Just like every radical thing they have done since 2008 to prop up a debt mess has become permanent. Look at the size of the Fed's balance sheet. They WANT to undo the trillions of dollars of quantitative easing they did (which went right into the stock market). But they can't without causing a depression now. Meanwhile, inflation is not just pumping up the stock market. Low lowest income and wealth groups have gotten destroyed by what all of the fiscal spending that was enabled by debt monetization by the Fed did.

2) Our government needs to refinance trillions upon trillions of debt that is coming due, even as it keeps running up more debt. But we can't afford the rates necessary to deal with the inflation they have unleashed. We have massive bond auctions now, almost on a weekly basis, and Janet Yellen has resorted to relying more than ever on short-term debt because if they lock in 4, 5 percent financing rates over 10 or 30 years, it will lead us to a default. Interest payments on our debt have skyrocketed higher -- simply because of rates rising by only about 200 basis points. Can you imagine what would happen if an actual market were putting rates much higher where it would take them (rather than them still being artificially suppressed)? More than half of our Federal budget would be interest payemnts. Something had to give. ... and it was the so-called "independent Fed" becoming what it always is -- a price-fixing mechanism to enable politcian's worst instincts by monetizing debt (and in the process taxing all of us in the hidden way the politcians prefer. ... inflation).

3) It's an election year coming. The overall economy is going to crash hard eventually and all at once at the level they brought the overnight rate to. Markets knew there was no way they would see it through to that. All of the "stimulus" is almost gone, debt levels are through the roof, and the bill was starting to come due. We need more debt piled on to keep the facade of a strong economy (on the back of consumer spending) going. That is what the administration in power needs in an election year, and the Fed always tries to give it in election years.

They are backed against the wall, still. Jay Powell's rhetoric has turned into monthly pivots and contradictions. He was going to lick inflation. ... and now he has surrendered to it. The whole "2 percent target" was bullshit to begin with. ... none of us are better off by them decreasing our purchasing power by 2 percent on an annualized basis. On top of it, the measures for that 2 percent don't capture the actual prices people are dealing with. Now. ... on top of it, they never got to that supposed 2 percent target. ... and they have been reduced trying to pretend that it is "mission accomplished." The bullshit around this goes on because 95 percent of the people in this country they lord over have no clue who they are or how they screw us all.

 

The purpose of that post was not "total collapse" or whatever prediction you think I am making.

 

The things everyone is affected by don't happen randomly or mysteriously.

These aren't predictions at this point. Look BACKWARD. After 2008, they used trillion of dollras of asset purchases and they price-fixed interest rates rather than allowing actual markets to determine the cost of money, in order to blow up our money supply (to try to prop up the debt they had created prior to 2008). That is inflation by definition. Anyone who said, "That is inflationary!" was not making a prediction.

The bulk of that massive inflation they created blew asset bubbles --- all around us, because the mechanisms they used to create that inflation benefited people who could afford to own assets. They made the rich richer and the poor poorer. Real estate, the stock market, vintage wines, classic sports cars, artwork. ... things like that, got blown into bubbles.

An artificially-created boom like that has ALWAYS come with a devastating bust. With the great depression having been the biggie in more recent times. That isn't a prediction. It's cause and effect. There will be a payback, and anyone sitting there doing "broken clock" stupidity to someone saying that is willfully ignorant.

The pandemic put stress on the house of cards they built. But the response was to do more debt monetization. ... on steroids. And that spread the inflation they created beyond just the asset bubbles I am talking about.

This isn't a prediction. ... it's just fact. Since 2020, the U.S. has printed about 80 percent of all the dollars in circulation. It's startling. Before the pandemic, we had less than $4 trillion in circulation. Today we have about $19 trillion in circulation. When people cheered on "stimulus" and our government went batshit crazy in fiscally irresponsible ways. ... the Fed jumped into action to monetize all of it. That comes with costs because you are stealing from your future to binge in the present. Someone saying at the time that wasn't making a blind prediction.

I'm not making a prediction or trying to be the rightest guy on the planet the way the responses will now follow, when I say: 1) When you destroy the dollar that way, it takes more dollars to buy things. ... And the runaway prices killing people was cause and effect. It's as immutable as the laws of physics. 2) All of that comes with a cost. I don't make actual predictions, because the timing of those costs, and where the costs get exacted depend on what the price-fixers fucking it all up do next to try to put off the cost. But whatever they do. ... just exacts greater costs down the line. We have been reduced to going from crisis to crisis, while people struggle because of the stagflation they hav effectively produced. Yet, it's a mystery to some people why so many feel economically vulnerable now. Beyond the present problems. ... the higher the debt levels they artificially induce in order to frantically hold off defaults (and what that does to the "economy" as people understand it). ... the more misallocated capital + more defaults at some point when there is payback. We're making it worse. Again, that is just cause and effect.

We're our own worst enemies. But people allow it to happen, most choosing to be willfully ignorant.