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re: 30-year fixed-rate mortgages reach 7.15%
Posted on 10/19/22 at 9:57 am to Aubie Spr96
Posted on 10/19/22 at 9:57 am to Aubie Spr96
quote:Most people don't realize that historically in order for the Fed to use the fed funds rate as a policy prescription, the Fed has to raise their rates to roughly 2% ABOVE the rate of inflation. Otherwise raising the Fed rate doesn't work to tame inflation.
Interest rates were NEVER supposed to be ZERO forever. It was bad policy that we had to pay for at some point. We have an entire generation that has no idea what the net present value of money is because interest rates were non-existent.
So, assuming the above, and the rate of inflation at 8.3%... 10+% Fed funds rate? I know the projections are for 4.25%-4.50%, but that shite don't work historically. Further, if the Fed funds rate is at 10+%, where are mortgage rates going to be?
Keep in mind USD hegemony has to be protected at all costs, so inflation has to be tamed. I don't know of many other policy prescriptions other than shrink the Fed balance sheet. The Fed rate is designed to slow money velocity and retracts USD in circulation. Anything else? I'm no econometrics nerd so I'm swimming in deep water.
This post was edited on 10/19/22 at 9:59 am
Posted on 10/19/22 at 10:07 am to alpinetiger
quote:
Keep in mind USD hegemony has to be protected at all costs, so inflation has to be tamed. I don't know of many other policy prescriptions other than shrink the Fed balance sheet. The Fed rate is designed to slow money velocity and retracts USD in circulation. Anything else? I'm no econometrics nerd so I'm swimming in deep water.
Walk it forward into 2023 and you'll see how Powell raising like a bat of hell now (something you don't often see in a mid-term year) appears to be setting the stage for major unemployment in 2023/2024. That's when the real shite hits the fan, Carter type stagflation on steroids.
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