re: Do experts on the money board agree with what the feds did today?

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HAHAHAHAHAAH! A fellow twitter bro.

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IYKYK

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What matters for most people is the monthly payment at the end of the day, and you can lower than significantly with lower rates. But if you bring them down too quickly then you'll cause even more inflated prices, because like you correctly stated the market is overpriced, but lower income housing isn't really that overpriced if we have decent rates.

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From looking at various data (housing sales moving back up, median price plateauing, etc), there seems to be a growing assimilation among potential buyers at accepting current rates as the new norm. If this is true, any cut in rates will send the real estate prices rocketing to the moon.

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That's going to happen anyway if federal government keeps creating more debt at its current pace.

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100% correct. But they will postpone it as long as they can.

And on the 8th day the Lord spoke on fiat currencies in democracies: thou shalt kicketh the can until thy run out of road. Then thy shall kicketh once more.

And so it is written.

Yeah, just don’t see the hikes coming with all that’s been released unless they break something, and that’s what I think they see happening, probably starting in June. They say banks, or commercial real estate, or unemployment, etc…but with the service of the debt both public or private, rates will have to drop and we’ll deal with higher inflation imo…

They can cut whatever they want, but real rates are market based.

There is so much debt that I’m amazed it has not collapsed yet. I don’t understand crypto, but I get why extra-governmental currency may be a good asset going forward. All governments monetize debt by printing more and more paper money. Inflation is the cruelest tax unless you are hard asset rich.

A billionaire does not care about prices going up 25%. He’s holding precious metals, fine art, raw land, stocks, minerals, and oil.

A working stiff pays full freight on inflation tax. Sadly many people think the government can create wealth for the masses if they just take more from upper 10% of earners to make the sun cool down or heat up more”sustainably.”

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There is so much debt that I’m amazed it has not collapsed yet.

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What are you even talking about? What would make you think there would be a "collapse"? Have you ever looked at Japan?

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A country that has an aging population

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We don't?

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average savings of over $125k per household

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Is that that much lower than the US?

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that's had negative interest rates for almost two decades?

Consumers hoarding money and then the government siphoning some of that hoard off is completely different than the US economy.

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The point is a crippling debt load hasn't been all that crippling. We have no reason to expect the US to "collapse" based on any current read out. Rather, that's wish-casting from those hoping for things to burn.

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We don't?

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Not nearly to that extent. Theirs is 49.1, ours is 38.5. The average savings (in the US) for 35-44yr-olds is ~$27k while the average savings for 45-54yr-olds is ~$48k.

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Is that that much lower than the US?

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Yes, the average savings in the US is ~$65k. This falls in line with the difference in savings by age groups (45% between age groups, 48% between countries).

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The point is a crippling debt load hasn't been all that crippling.

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That's a poor point as you're trying to compare debt loads in two societies which have very different fiscal and economic behaviors from one another (another example is that the Japanese still largely prefer to use cash rather than credit/debit cards, which undoubtedly aids in their larger savings).

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We have no reason to expect the US to "collapse" based on any current read out.

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Yes and no. Here's the "yes":

--We're not at the 1920's German Papiermark levels, but that's solely because the USD is the skinniest kid at fat camp. The problem is that we're eating as if we could never get fat. What this means is that almost every country is having problems with inflation right now, the USD being the primary reserve currency means we're able to weather it better than most as the world is more dependent on it than any other single currency. As long as that driver of value remains, the USD will continue to stay among the strongest in any global economic problems (see: Milkshake Theory).

Here's the "no":

--The primary driver of value for any fiat currency is how much of it exists. For instance, a mint original copy of Action Comics #1 is worth over $3M. If everyone had 20 copies of it, you couldn't give it away. Currency isn't any different (at least from a generalized view).

When the federal government creates debt but never pays it down (like ours has been doing for over 20 years now), that creates a lot of excess currency. The USD is (by far) the primary world reserve currency, so that excess can be blunted to varying extents as it spreads throughout the world. The problem is that creating debt like that means you need people to buy that debt. As you go deeper into debt, you'll need to offer more and more in return to get people to buy that debt. If you are only servicing that debt, it will eventually get so expensive that it creates a debt spiral in that you need to create debt in order to service the debt you already have, then you'll need to create even more debt in order to just service that new debt, which means you'll have to create even more debt in order to just service that debt, which means... etc.

Unless the debt starts getting paid down, the eventuality is the collapse of the currency under the weight of the debt. That outcome is a fiscal certainty unless borrowing slows and there's some movement on paying down the debt.

There is absolutely nothing in the works at the federal level to come anywhere close to balancing the budget, much less pay down the debt. Nothing. To the contrary, despite which party controls what branch of government we've seen a somewhat steady increase in debt creation since the Great Recession. The fiscal irresponsibility we saw during COVID threw gasoline on the lightly burning embers of inflation, causing it to flare up. The Fed raised rates to fight that inflation, yet both the federal government and the consumer are still feeding inflation by creating massive amounts of currency through debt creation.

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Rather, that's wish-casting from those hoping for things to burn.

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Why do you think inflation refuses to drop below 3%? After a year of higher interest rates, why are both PPI and CPI starting to consistently come in "hotter than expected"? Why are consumers still creating historic levels of credit card debt while credit card interest rates are at historic highs?

Last year the federal government paid just over $1T to service the debt at that time, going forward there's no point where that amount lowers. As more debt is created but never discharged, that amount only increases. For FY2023 it was just over 23% of total revenues, the last time it was anywhere close to that was the late 90s when we were paying down on the debt. From that point until 2023, it ranged from 15%-18% of total revenues. FY2022 was 16.9%. In other words, we've seen a roughly 6% increase in debt over revenues in only one year. Going back to at least 1977, the next highest increase was 3% (and that was the early 80s when Volker had rates sky-high to fight inflation and trade our trade deficit was only a fraction of what it is now).

In July the debt was $32.6T, today we're at $34.6T. This means that around every 4 months the federal debt increases by $1T (prior to COVID it was around 12 months). With only servicing debt without paying it off, that timeframe will continue shorten as time goes on and that shortening will happen faster. This isn't speculation, it's basic math.

I would argue that this puts us now beyond the point where 2% annual inflation no longer reduces (nor even maintains) debt burden. We may even be beyond the point where 3% maintains debt burden.

Because there's nothing in the works to change course on the federal government's debt creation, there's nothing in the works to change the fact that the growth of debt servicing is going to outpace revenue growth (if it hasn't already happened). This isn't "wish-casting", it's looking at the data and extrapolating what's likely to happen based on what's driving that data. It's nothing more than understanding cause and effect.

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Japan isn't a valid comparison to us. They are a net exporter.

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They are a net importer of food and energy. Would you like to swap spots on that?

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Trump and Biden trade policy with China is reversing the formerly deflationary effects of globalization.

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I think this is the much bigger story.