Slow Down?

[Raven59]

I'm a female ( Grant is a former last name . J initial)

This is is a bulletin board, I am not being paid by any of you to take time and look up data to "support" my opinion on the topic of lender ethics... I am not doing an appraisal when I give an opinion, nor is anyone else here, for those who want to act like a client client demanding "Support"
It's this kind of nasty petty stuff which have driven too many people away from the board, just sheer petty nonsense.

If you can stay positive in a negative situation, you win.

 

[Deleted member 126639]

The problem is that the "cure" to the last recession was (among other steps) to lower rates as low as possible. The economy has improved in the 10-years since, but the recent federal tax cut is a form of stimulus that was not seen by economists as being needed, given the growing economy. The resulting risk of over-heating in the economy is the root of inflation. Raising rates is a necessary step for the Fed to take in response, and it's not in itself something that will cause a recession at this point. What it will hurt, however, is the real estate sector, as many property owners don't want to buy new as they have a mortgage that is at a rate below what could be found in today's market.
I've said it before on here, but appraising is a profession that thrives in recessionary times, and vice versa. It's not a surprise that as the economy is strong, work for appraisers is slower.

1) Inflation has never been a problem for any country that remains sovereign. No, the Weimar Republic was not monetarily sovereign. They were under military occupation. Zimbabwe is not monetarily sovereign due to US imperialism and dollarizing of their economy. Venezuela's central government effectively doesn't demonstrate sovereignty. Monetary sovereignty is enforced via 1) civil courts that adjudicate debts in the sovereign currency and 2) taxation. Sovereign governments have no need to raise revenue via taxation. Taxation is, historically, about imposing sovereignty. In modern times, it is about controlling for inflation (which can happen in a small scale) or more often misallocation of resources.

2) The past decade has been, what most economics call austerity. The reality is that the government must always run a fiscal deficit in modern economies. This is because the vast majority of money is created as debt (or as FIRREA defines them "new money loans"). Banks are not intermediaries of loanable funds. Loans create deposits, not the other way around. The problem is every dollar created by a bank comes with a future interest obligation. If the sovereign authority that regulates the currency it issues does not issue enough currency free of interest, the only way to service existing debt is to take out more loans.

3) Understanding #3, in a rising interest rate environment, deficit spending must increase dramatically, otherwise you will have depression level foreclosures and mass defaults. In fact, this is exactly what caused the Great Depression. Not coincidentally, this is also what led to the Great Financial Crisis. Those glorious Clinton Surplus years? A fiscal surplus is a gigantic vacuum sucking money out of the economy. That is what caused a massive real estate bubble, as again - money to service existing debts can only be created by banks as loans or as fiscal deficits. As the government decided to run massive surpluses, the inevitable result was a real estate bubble.

4) Fiscal deficits have never been sufficient to cover monetary expansion via bank lending effectively since the 1990s. No, QE did not help the common man who had to pay his mortgage. QE was about stabilizing the global monetary system, as a complicating factor here is the USD is the primary means of foreign exchange. See the Triffin Dilemma to understand more.

5) The world is shifting away from using the USD for foreign exchange. What will happen is interest rates will continue to rise, but large fiscal deficits will follow. We are effectively returning to a modern form of the Bretton Woods System. So, the reverse of the massive monetary expansion under Carter and Reagan will occur, but it will be by attracting foreign held dollars back into the country. This process is going to be rocky and hard to explain here.

 

[Deleted member 126639]

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