re: When do interest rates rise

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Do you people really think a 0.25% increase is going to pop a housing bubble and set off a yearslong economic malaise?

Banks are tight as hell compared to pre 2008. Jumbos are selling like hot cakes though

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People usually prepare and look out for the last crisis in anticipation of the next one. Of course, the same crisis rarely repeats itself. So people expect another housing bubble. Or maybe it's car loans. Or stocks. Or student loans. Most people are looking for bubbles. And most people will be blindsided by the next crisis because it will be due to something different. The cycle will repeat because people, collectively, are stupid.

Don't get me wrong, I think asset prices in general are inflated due to cheap money policies. I'm not expecting a 0.25% increase in interest rates to cause some great market panic, though. However, since cheap money has resulted in generally inflated asset prices instead of mainly growth and increased consumption, cheap money for too long could potentially lead to one or more asset bubbles.

China may be the next catalyst for a pullback or crash, or it could be orange juice futures. But the average person isn't going to see it coming due to the prior reason, because the average guy neither has or seeks enough information to identify issues in the general economy, and because the average guy won't stay rational long enough to interpret the data even if he has it. And believe it or not, that's okay. We live and operate in a specialized economy, so we don't need everyone to point out the source of the next recession or stock market crash. People just need to have sufficiently robust investment portfolios that they can weather future storms.

Bc bless your heart if you believe the fed numbers on inflation and unemployment. What's your grocery bill look like? Mines like $200/week for 2 people at whole foods nowadays. Did you notice pos Chevy/ford trucks are like $60-100k these days? Crummy suburbia houses are $300k now? Inflation is well over 3% but the fed posts the silliest stuff. Unemployment is probably well north of 10% probably 10-20% range but they post some nonsense sub 5% or whatever.

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If cheap money has led to an asset bubble then why hasn't inflation moved above 3%?

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I don't think you understood my post. I didn't say we are in an asset bubble. I said that asset prices in general seem inflated. Me saying that asset prices seem a little frothy isn't the same as Greenspan saying that the housing market was frothy. If my words could move the market, I would only call the market frothy when there's a full on bubble, too. But I'm not, so I call it like I see it as a market that I view as a bit too expensive for my tastes.

Second, inflation is measured by the Consumer Price Index and Producer Price Index. These indices account for consumption and production costs, not the prices of assets like stocks, bonds, and real estate. Consumption doesn't seem to have increased much, so CPI and PPI won't increase too much either. The average consumer is recovering from a banking crisis that negatively impacted their credit scores, so they'll take a bit longer to recover than most companies and the general stock market.

I got ya, I misunderstood your first post but to my point, if cheap money was lent out like everyone thinks it was, then consumption and inflation would realize that. My point is, it hasn't, you can see that in M2 supply as well.

DabigFella, if that's really your argument, which essentially every economist and analyst would disagree with you on. Then I got nothing else for your ignorance.

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to my point, if cheap money was lent out like everyone thinks it was, then consumption and inflation would realize that.

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I think you have to look back at the financial crisis for context as to how cheap money has been lent out and used. The financial crisis wiped out the credit scores of a large amount of consumers, and as the effects of that crisis rippled through the rest of the economy, many people ended up losing their jobs. Both have strongly negative impacts on consumers getting loans, and that's not even considering people trying to rebuild their stock portfolios, mainly if they panic sold. So we're sitting on consumers who need time to recover before they start really taking advantage of low interest rates, and that could explain low CPI inflation, which by extension, leads to low PPI inflation.

So who has really been using cheap money? I'd say it's businesses and the smarter money - the top 10-20% of wealthy Americans. Businesses take advantage by buying back shares, issuing dividends, and acquiring other companies. Buybacks hide lower total earnings because people focus on EPS, and the buybacks and dividends increase the stock price. But none of those three purposes are really improving the economy like increased consumption would and are arguably hiding the results of weak consumption. As for the smarter money, they enjoyed the stock market climb and took advantage of rates by buying the cheap real estate the crisis produced. The rich got richer because they're smarter, not because of greed. But you can't expect a Bernie Sanders follower to believe that because it challenges how much they really know about money, markets, etc (which they really know quite little, but hubris is a powerful thing).

Now I do agree with all that you said there.

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Not to the extent of 2008 but I think its happening. Once rates go up, the less house someone can afford and will drag home prices lower.

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The good news is that far fewer people are in homes that they can't afford as compared to 2008. Housing pricing would likely flatten or decline, but there won't be the number of people in negative equity or number of foreclosures.

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Unemployment is probably well north of 10% probably 10-20% range but they post some nonsense sub 5% or whatever.

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While I can get on board with inflation numbers being borderline joke, there is no way there is 10-20% unemployment.

At least, given the known way unemployment is measured, there is no way 10-20%.

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While I can get on board with inflation numbers being borderline joke, there is no way there is 10-20% unemployment. 

At least, given the known way unemployment is measured, there is no way 10-20%

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The ~90 million+ adults unemployed/permanently out of labor force might disagree with your observational analysis. I'd venture real unemployment is 20% at a minimum, and approaching Depression-like levels (25~30%)

Being generous to your argument, the current labor force participation rate hovers around 61-63% month to month, the lowest it has been in over 30 years.

"Given the way unemployment is measured", if the economy stays on its current path, pretty soon we'll have 100 million adults out of the labor force and sub 4% unemployment. The current scenario cannot create real unemployment at the current rate around 5%.

If you want to see a real labor market where unemployment was below 5% try GWB's first term until 9/11/2001. This is the last time the economy was at full employment.

As Obama will soon become the only president in history to have ZERO quarters during his administration with GDP growth at or greater than 3%, why is it impossible to believe unemployment exceeds 20%, or even your 10% figure?

The only folks I see that can't get a job are those that are over 50 and were laid off back in 08-09, they don't have much skill and will not accept a lower tier job than their previous one. Essentially they've been replaced by a younger group who is cheaper or a computer.

The second group that can't get a job are the ones finishing college and still can't put down the dope.