It’s 1981 again

[Neodymium60]

CPI up to 8.5%.

Brings back fond memories of my 17% mortgage.  My appalled father in law said to me that “now you know what usury looks like.”

 

[Mick]

My first mortgage was 13.5% with a starter rate at 9.5%.  I got out after two years.  Ugh.

[Neodymium60]

What do think the odds are that mortgage rates get to 10% given the velocity of the CPI?   And if the FED does not raise them, then what happens?

Volker was really cold blooded about it.  I still think he went too far.

Usually the housing market heats up when the rates start to rise but nothing yet.

[rogpodge]

Volker did what he had to, given the circumstances. Our Fed has not over the last decade. Keeping rates artificially low helped the housing market and the stock market, but didn’t help the average American. The pressures have been building, and now that there is an exogenous shock (high oil prices again, plus supply chain from China and incompetence), it’s got no where to go but up.

https://mobile.twitter.com/nickrmanes/status/1513847059216019457?cxt=HHwWgsC5jab4oYIqAAAA

Smarter people than myself have figured out what to do.

https://mobile.twitter.com/JesseLee46/status/1513874750875090957

Neo, pointing out how bad inflation is means you are lockstep with Putin.

 

 

[Neodymium60]

Putin and Senator Rick Scott I might add.  And Black Rock.

As your links point out large investors like Black Rock are buying 25% of the homes for rental purposes I suspect.   I wonder what Black Rock would offer me for my property.  I’m open to a big number.  Cash or Bitcoin.

[Mick]

What do think the odds are that mortgage rates get to 10% given the velocity of the CPI? And if the FED does not raise them, then what happens? Volker was really cold blooded about it. I still think he went too far. Usually the housing market heats up when the rates start to rise but nothing yet.

The housing market had already been heating up.  It’s pre-heated, if you will.

S&P/Case-Shiller U.S. National Home Price Index (CSUSHPINSA) | FRED | St. Louis Fed (stlouisfed.org)

• This reply was modified 4 years ago by Mick.

[rjnwmill]

Over the last 40 years housing prices have increased twice as fast as GDP. With borders wide open, I suspect this trend will continue?

Here's a toast with one last pour, may it last forever and a minute more;
Good fortune seems to you have sung, to live and love way past long

[Mick]

I always wonder about the shadow inflation rate.  The dirty little secret about inflation is that every so often the government adjusts the “basket” of goods and services to, quote, unquote, “more accurately reflect the cost of living and inflation.”

What it really does is hide the true inflation rate, thought to be about 17% if you use the 1990 basket of items:

Alternate Inflation Charts (shadowstats.com)

[rogpodge]

https://mobile.twitter.com/GraduatedBen/status/1513916337596375040?cxt=HHwWgIC9oeq4wYIqAAAA

[rogpodge]

https://finance.yahoo.com/news/when-inflation-was-even-worse-212636275.html

Don’t forget they changed the formula and the basket of goods. Volcker was willing to play the villain. It worked, though, after the pain.

[Mick]

Question is, is the current Fed willing to take a similar approach (agreed that Volcker overdid it)?

[Author]

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