Fed Sponsored Speculation: Real Interest Rates Are -4.1 Percent, Lowest Since 1980
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11 comments on Fed Sponsored Speculation: Real Interest Rates Are -4.1 Percent, Lowest Since 1980
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11 Comments
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2 years ago
Can a time-limited expenditure outweigh the deflationary forces of globalism, demographics and technology?
2 years ago
Why not just eliminate OER entirely and replace it with actual rents? Actual rents were up slightly less than Owners Equivalent Rent, which is a hypothetical number.
2 years ago
To do it properly, they should use a weighted average . Take the increase in actual rents times the percentage of people who rent, and take the actual increase in home prices times the percentage of people who own homes.
2 years ago
I guess there’s just a philosophical issue: real estate is not an expense, it’s an asset. Rent is an expense. The cost of home repairs and improvements is an expense. Utilities are an expense. Mortgage interest is an expense, but real estate is not.
2 years ago
Looked at from another angle, currency devaluation is the only process that the Potent Directors have left, to maintain the illusion of “growth,” so necessary in keeping this Ponzi circus going.
Mish makes a good point in this post,,,,making one aware of the difference between “nominal” and “real.” Fiction and fact, as it were? The former stirs the imagination, the latter buys groceries,,,or not. 😉
2 years ago
I find the whole inflation discussion to be pretty interesting, because it’s not cut and dried and there seems to be a lot of informed debate that swirls around it.
While this Mish posting’s discussion is on the impact upon interest rates, the whole inflation/deflation topic keeps me intrigued. One recent point that caught my eye was a guy on another investment board that I read who has 35-40 years of experience deep in an old line industry (as well as in investments) where he’s at ground level and sees a lot of the daily goings-on with supply chains, distribution, etc. He made a point that he thinks the inflation will be more lasting and less transitory than many are saying. His back up arguments focused on the fact that a lot of the analysts do not work closely out in the field and see what he’s been seeing – and that many of the supply chains and related functions are not going to just re-start rapidly but that there are some longer term issues festering.
I don’t have any specific experience to judge his point, but found it intriguing because most things I read online about this are by economists and financial analysts who aren’t necessarily seeing it from the inside day to day.
Another thing I read by Lyn Alden yesterday (before it’s hit her public website) was a follow up on her article last week on inflation. The most memorable point I got from the new article was her dividing the idea of transitory inflation into one category that looks at the rate of change changing from going up fast to coming back down relatively swiftly (where one would expect the current hot number to decline in its ascent back close to where it started) vs. a period of transitory hot inflation, still followed by a swift descent, but not declining as far or back to where it was – so it reaches a new plateau not as high as during the transitory peak, but pulling back to a level that remains higher than it was before the takeoff. I’ll just have to keep an eye on all this to see what actually unfolds.
2 years ago
My friend Dan just sent out an email in which he suggested that the current inflation from supply side constraints will be a multiplier for any future “regular” inflation from increasing the money supply. Worth a read, FYI.
link to danielamerman.com
2 years ago
That guy’s writing is thought provoking too – you had provided me with a link to his writings another time earlier as well that I enjoyed.
I like the way he points out that we have come to think of abundant supply of the things we need as natural, when in fact it’s a more recent development and subject to disruption. Something I don’t normally place into my day to day thinking.
I differ a bit on his opinions that there’s some grand plan at work to create shortages to meet other goals of the elites though. For example, in California, it’s not as easy as saying they’re blocking housing creation to create intentional shortages everywhere. There is a real issue with overcrowding, transportation congestion, pollution, and impacts to global warming that comes with building endless housing in the crowded metropolises. The regional governments are working towards encouraging more housing, etc., but existing homeowner resistance to new crowding, rightly or wrongly, causes some of the struggles while the state is trying to work towards more of a balance. It’s not easy. I suspect that Austinites will find this out in Texas soon enough.
2 years ago
Gold broke out.
Thanks to whoever it was who recommended Lyn Alden. I’ve been listening to some of her interviews on YT. According to her, the only clear correlation for rising gold prices is….negative real interest rates. Which makes sense, I suppose.
2 years ago
… and props to Mish for his gold call a few weeks back… up over 4% so far on that bet.
2 years ago
Mish did a story on this.
link to mishtalk.com
It’s convenient for people to associate Gold price movements with real rates at the moment, because they can point to a recent correlation. It makes it easier for market makers to hedge positions etc. Clearly low rates, real or nominal, are positive for Gold because of the reduced opportunity cost of holding it. However on balance I’d go with Mish’s view over a longer time horizon that it’s down to trust in Central Banks. On this basis Gold is still very attractive because in my view CB’s are just digging themselves into a bigger hole as time passes.