Posted on 04/02/2024 1:16:43 PM PDT by Kaiser8408a
I expect WH will try.
Bitcoin.
missing the point. They overcooked the money supply. It had gone up insanely.
Mrs. Wills and I bought our first home in 1987, while Ronald Reagan was still president. The initial rate, with points at the time, worked out to 14.5%. We refinanced a few years later while Bush was in office, and thought we’d gotten a great deal when the refi rate was “only” 12%.
The interest rate on mortgages has been higher than it is now for the majority of the last 40+ years. It will come down again, but those declines in the past have followed things like the “Dot-com crash” and then the 2008 financial meltdown over junk mortgages.
The local owner of a very successful real estate brokerage firm told me that potential buyers are telling his agents that they are waiting for 30 year fixed mortgages to “begin with a 5” (i.e. 5.99% APR).
He thinks the dam will break at this threshold both in therms of supply and demand.
FWIW
Why are you buying a 10 year equlivent through anything but an at your brokerage bond fund keyed to the 1,2,5,10 year rates? Example Symbol - FLOT and TFLO. The yield per quarter is the dividend. And yes the custodian is blackrock.
75 billion off the feds books per month while barrowing 1T per month mostly barrowed from the fed. Mixed messages with a net result of no control of effective control either inflation or rates.
Since the CPI is based on a basket of Housing, Food and Automobiles.... 2 of the three have some real year over year comparison issues.
Needs to go a bit higher to get back to the historical average...Fed manipulation to zero lasted way too long and stoked inflation. People are spoiled by the artificially low rates since the “GFC” of 2008/2009.
Keep bringing in millions of illegals and paying for their housing with tax dollars. That will sure help the housing costs.
I started getting credit card junk mail again. 29.99% annual interest. That’s loan shark territory. I don’t carry a balance on the ones I have but they are all in the high 20s.
Best economy ever. If only I weren’t so blind to see how real inflation during chomo Joes reign is easily 100%
“75 billion off the feds books per month while barrowing 1T per month mostly barrowed from the fed.”
For the Treasury to be “borrowing from the Fed” would require the Fed to purchase bonds directly from the Treasury.
They don’t, that’s prohibited in the Federal Reserve Act, and any Treasury purchases done by Fed are done in the secondary market.
In the early 1980s large bond buyers, “the bond vigilantes”, began fighting back against inflation before the Fed did by refusing to buy new Treasury debt or even selling their own holdings into the Treasury’s auctions.
I suspect that we haven’t seen anything like the Bond Vigilantes since then due to the influence of China in our debt market.
“I think they will cut at least once and that it will be in June because of the political pressure from the White House.”
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Agree. They will cave to WH pressure and probably do two small cuts so as to make them appear warranted by “slowing economic activity” or some such cover for what is purely political.
The problem for the Fed though is rising oil prices which will contribute toward more inflation, but that can be can be temporarily camouflaged with a little economic legerdemain.
USFR is another floating rate option for those looking to invest in treasuries with short maturities.
For the Treasury to be “borrowing from the Fed” would require the Fed to purchase bonds directly from the Treasury.
They don’t, that’s prohibited in the Federal Reserve Act, and any Treasury purchases done by Fed are done in the secondary market.
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True, not directly. But indirectly it can have much the same effect. What if the Fed wasn’t buying from the secondary market?
“True, not directly. But indirectly it can have much the same effect. What if the Fed wasn’t buying from the secondary market?”
Then the money supply would be more restrained, keeping inflation at bay. Your suspicion that the effect is pretty much the same either way is correct.
A reason that the Fed buys in the secondary is because doing so allows the bond buyer market to determine interest rates. If the Fed buys directly it short circuits that process and creates havoc.
But any time that the Fed purchases Treasuries it is “monetizing the national debt” and increasing the supply of “high powered money” in the banking system. And that allows retail banks to do a lot more lending which is where the money supply has its greatest growth. Fractional reserve lending.
The indicted co-conspirator in the inflationary destruction of the Dollar is Congress. Congress keeps raising the debt limit, the Treasury sells more T-bills in response, and eventually the Fed ends up buying some of them which increases the high powered money supply.
Back before Nixon, when we still had a (weak) link to gold, Fed chairmen could browbeat Congress showing them that their spending was wrecking the dollar. Even the dullards in Congress could get the idea. The quasi-gold standard may not have meant much but it did restrain Congress some. Now the whole budgetary process is totally out of control and we probably are heading for some sort of financial cliff that will be way uglier than we can imagine.
“Now the whole budgetary process is totally out of control and we probably are heading for some sort of financial cliff that will be way uglier than we can imagine.”
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Moody’s is the only remaining credit rating agency that has maintained a AAA rating on U.S. government debt, however it did lower its outlook to “negative” late last year. We are rapidly spending our way to a $35 trillion debt so it wouldn’t be surprising to see Moody’s issue a downgrade soon. To your point, congress seems undeterred by any spending concerns. The unrestrained spending continues apace, as does the cost of servicing the debt.
I share your view that we are probably heading for a financial day of reckoning.
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