Is there any way for someone locked into a low rate to harness some of that value even if they move?
I've talked to a number of people who, for various reasons, would like to move but aren't because they don't want to go from 2.X% to 6.X%.
Surely, the person who currently owns their mortgage would benefit if they paid it off early. Shouldn't the two sides be able to come to some agreement where the person who wants to move gets paid a lump sum to do so.
Either this exists and I don't know about it or there are some difficulties preventing it from happening.
Fine title, Very Excellent sub-title "a plausible scenario".
All macro forecasts should be so honest, and suggest with more humility that their scenario, is usually only plausible. When the economy is giving mixed signals, most forecasters who give "likely" scenarios will be wrong (some will be right - mostly thru luck, not superior analysis/ understanding).
"We have never, ever, had three months with an average increase over 350,000 jobs followed by a month with less than 50,000 jobs created." I'm wondering if these numbers were converted to relevant percentages the statement would still be true for after WW II and WW I, times of large adjustments.
Since two quarters of declining GNP is NOT the "definition" of a "recession", it's also not clear what "Screeching Halt" means, nor what the jobs increase numbers mean. Especially now, with the post Covid transition shocks, combining with incompetent (but hardly criticized by name) Biden folk failing to minimize supply chain problems, and wildly "spending like a sailor" (as the phrase is used in Mack the Knife, etc.).
Economics is strongly NOT a science, not like chemistry nor physics nor biology. Economists don't agree on how to define or measure many metrics they use (like "recession"), nor even if unemployment is a better measure than total employment. I think total employed is a better stat.
The housing market crash should shock many other sectors into contraction. IPOs and VC activity has been low for months, yet still getting lower (including substack NOT asking for more funding). Perhaps this will lower GNP enough so that it IS called "recession" (which Arnold resisted last month).
But recessions are countered by printing more money. More money printing leads to more dollars chasing the same goods, for an increasing price, which means more inflation, which the Fed will be beaten with unless they continue to raise rates until the inflation goes down.
Seeing as how the Fed is failing to keep inflation down, it might seem a good time to take away more of the Fed's responsibilities - but who else is better able to consider unemployment along with inflation?
Arnold thinks "it will take a while for inflation to settle down." How long? What if, in 1 years time, inflation is much lower (<4%)? Why did that happen? {this is a good way to look at the other side)
1) The Fed's rate rises did lead to a screeching halt - which flushed out a lot of marginal businesses.
2) Congress reduced its growth in spending, with a lower but still high deficit.
3) Most supply chain problems were solved at fairly low costs (markets are best AND good at helping companies & customers choose reasonable alternatives).
4) There was higher energy production in the USA and in OPEC countries
5) Russia & Ukraine came to an agreement and Russia energy exports were again bought by Europe
6) Most of the higher prices from the inflation remain so that most products cost 20-30% more than 2019, and there is only slow reductions in prices.
But with higher prices yet reduced gov't deficits, and lower energy costs (due to higher priced higher supply), the price changes are reduced and the higher price level is being stable.
We also have to consider real interest rate (nominal rate - inflation) that is now even more negative. If I am connected enough (politically or collateral) to borrow at 6% variable loan and invest in something whose value equals inflation at 9%, I make 3% on other peoples money (OPM). Better than that, I can deduct the 6% from my taxes and the 9% can be tax free in the future or long term capital gain. The only risk for this "free profit" is the inflation rate going down rapidly in the area where you stored you value, whether it is gold, steel, stock market, crypto, or real estate.
If the government continues to create and spend more dollars, picking the inflation area and access to debt becomes a source of creating wealth. Who has political access to negative real interest rates is the game at the present time. Using your money to create a new business innovation is a very high risk future, when their are hundreds of activist and bureaucrats with veto power to kill your business plans or shake you down for their "free" money cut.
I’d question your comment on venture capital industry and the “inventory of unsold startups”. I don’t have any inside information per se, so maybe you’re better informed on this point. But it seems to me the IPO has been declining in popularity as an exit strategy, even through the recent period of growth. Instead, companies are either staying private (“unicorns”) or being purchased by larger companies. I don’t know that venture hasn’t slowed down regardless, but it’s just that I don’t think the number of IPOs is the best measure of the “VC inventory”.
I observe that liquid paper assets like stocks, bonds and commodities all falling. Meanwhile, the US Dollar is rising relative to other currencies, as well as the 10-year treasury.
You would think this means that prices would be falling at the shops and market but they are not.
So this means the prices must be rising in less liquid and opaque sectors like wages and housing? If not, where does inflation come from?
Is there any way for someone locked into a low rate to harness some of that value even if they move?
I've talked to a number of people who, for various reasons, would like to move but aren't because they don't want to go from 2.X% to 6.X%.
Surely, the person who currently owns their mortgage would benefit if they paid it off early. Shouldn't the two sides be able to come to some agreement where the person who wants to move gets paid a lump sum to do so.
Either this exists and I don't know about it or there are some difficulties preventing it from happening.
What happened in the 1970s?
Would lay offs by the large corporate sector not lead to lower labor costs to the small business sector?
Will a negative real GDP report in late October make the FED buckle? or at least make the dot plot look like a waterfall? Stay tuned.
Occam's Razor
if something that has never happened before happens
it is simpler to assume (or suspect) that the data about job growth was wrong
Fine title, Very Excellent sub-title "a plausible scenario".
All macro forecasts should be so honest, and suggest with more humility that their scenario, is usually only plausible. When the economy is giving mixed signals, most forecasters who give "likely" scenarios will be wrong (some will be right - mostly thru luck, not superior analysis/ understanding).
"We have never, ever, had three months with an average increase over 350,000 jobs followed by a month with less than 50,000 jobs created." I'm wondering if these numbers were converted to relevant percentages the statement would still be true for after WW II and WW I, times of large adjustments.
Since two quarters of declining GNP is NOT the "definition" of a "recession", it's also not clear what "Screeching Halt" means, nor what the jobs increase numbers mean. Especially now, with the post Covid transition shocks, combining with incompetent (but hardly criticized by name) Biden folk failing to minimize supply chain problems, and wildly "spending like a sailor" (as the phrase is used in Mack the Knife, etc.).
Economics is strongly NOT a science, not like chemistry nor physics nor biology. Economists don't agree on how to define or measure many metrics they use (like "recession"), nor even if unemployment is a better measure than total employment. I think total employed is a better stat.
https://www.bls.gov/ces/
so far for August, looks like high employment increases, and 3 month, 6 month & 12 month.
But there's also that real earnings have down 2.8% since Aug. 2021:
https://www.bls.gov/opub/ted/2022/real-average-hourly-earnings-down-2-8-percent-from-august-2021-to-august-2022.htm
The housing market crash should shock many other sectors into contraction. IPOs and VC activity has been low for months, yet still getting lower (including substack NOT asking for more funding). Perhaps this will lower GNP enough so that it IS called "recession" (which Arnold resisted last month).
But recessions are countered by printing more money. More money printing leads to more dollars chasing the same goods, for an increasing price, which means more inflation, which the Fed will be beaten with unless they continue to raise rates until the inflation goes down.
Seeing as how the Fed is failing to keep inflation down, it might seem a good time to take away more of the Fed's responsibilities - but who else is better able to consider unemployment along with inflation?
Arnold thinks "it will take a while for inflation to settle down." How long? What if, in 1 years time, inflation is much lower (<4%)? Why did that happen? {this is a good way to look at the other side)
1) The Fed's rate rises did lead to a screeching halt - which flushed out a lot of marginal businesses.
2) Congress reduced its growth in spending, with a lower but still high deficit.
3) Most supply chain problems were solved at fairly low costs (markets are best AND good at helping companies & customers choose reasonable alternatives).
4) There was higher energy production in the USA and in OPEC countries
5) Russia & Ukraine came to an agreement and Russia energy exports were again bought by Europe
6) Most of the higher prices from the inflation remain so that most products cost 20-30% more than 2019, and there is only slow reductions in prices.
But with higher prices yet reduced gov't deficits, and lower energy costs (due to higher priced higher supply), the price changes are reduced and the higher price level is being stable.
We also have to consider real interest rate (nominal rate - inflation) that is now even more negative. If I am connected enough (politically or collateral) to borrow at 6% variable loan and invest in something whose value equals inflation at 9%, I make 3% on other peoples money (OPM). Better than that, I can deduct the 6% from my taxes and the 9% can be tax free in the future or long term capital gain. The only risk for this "free profit" is the inflation rate going down rapidly in the area where you stored you value, whether it is gold, steel, stock market, crypto, or real estate.
If the government continues to create and spend more dollars, picking the inflation area and access to debt becomes a source of creating wealth. Who has political access to negative real interest rates is the game at the present time. Using your money to create a new business innovation is a very high risk future, when their are hundreds of activist and bureaucrats with veto power to kill your business plans or shake you down for their "free" money cut.
I’d question your comment on venture capital industry and the “inventory of unsold startups”. I don’t have any inside information per se, so maybe you’re better informed on this point. But it seems to me the IPO has been declining in popularity as an exit strategy, even through the recent period of growth. Instead, companies are either staying private (“unicorns”) or being purchased by larger companies. I don’t know that venture hasn’t slowed down regardless, but it’s just that I don’t think the number of IPOs is the best measure of the “VC inventory”.
It will likely take a deep, deep recession to put a stake through the heart of this inflation pulse, and even that might not work this time.
I observe that liquid paper assets like stocks, bonds and commodities all falling. Meanwhile, the US Dollar is rising relative to other currencies, as well as the 10-year treasury.
You would think this means that prices would be falling at the shops and market but they are not.
So this means the prices must be rising in less liquid and opaque sectors like wages and housing? If not, where does inflation come from?