Are They Joking? Another 75 Basis Points? How Bad Was It Then To Have To Do This?
2002/3 1% Interest Rates, Tax Cuts to jump-start the Economy. Housing in a slump.
2004 A steady climb from the 1% Interest Rates, 0.25% each month, to eventually get to 5.75%. Housing heading higher.
2006 Interest Rates stop getting raised, and unlike most cycles that wait 6 months before lowering again, they are held steady for over a year. No rate cuts, and a Housing Market that is suffering withdrawals as the Interest Rates are held higher.
2007 Interest Rates finally lowered, why it took so long is a question that needs to be asked, the official line was that there were still ‘Inflationary Wage Pressures’ in the economy. Huh? Wage Inflation was not seen by Average Joe! Joe could not walk into work and demand more money each week. The Rate then is dropped from 5.75% to 3% in a real hurry, as if the Fed had a demon on their backs that they had not seen coming. Housing in a complete mess, sub-prime loans not able to be switched to Adjustable Rate Mortgages, or ARMs, because of the lack of liquidity, created by higher Interest Rates than at the time they were taken out.
2008 Looking to drop to 2.25% in March, taking Rates to lows not seen since 2002. Interestingly enough as the Fed Overnight Rates dropped from 5.75% to 3%, and now maybe even down to 2.25%, the average Mortgage Rate has increased from 5.75% to just under 7%. Hmmmmmmm, the only beneficiary of lower Rates here are the lenders and their Balance Sheets.
2009 The Cycle of Boom and Bust starts, and at this rate the 2012 Election will be great timing to say "Well that one didn’t work, we are back in a Bust Cycle again". Somebody has to answer the question, just so it is not allowed to happen again; why were Interest Rates left alone for so long? Lowering now, with raging Inflation, really is akin to saying; we are dropping now because we look bad, no matter the cost in 3 years time, we’d rather act now, and suffer the value of the Dollar getting stripped to the bone as Inflation ravages it.
What a shame that mantra was not in place in 2006/7 when Rates could have been dropped little by little, and liquidity would maybe not have been such a jolt to the system. This is going to be really painful as these lower Rates get paid back over time, and as Inflation takes its toll. It is not as if the consumer is seeing the change in Rates, that will not get reflected for another 9 months yet in economics, and maybe not at all in Mortgage Rates for new Home buyers.
Ouch, this is going to hurt, and NO Mr B, please do not allow the Printing Presses to be fired up again, us U.S. consumers already have enough debt to clear up first it would seem. Why not ride it out and set a stake in the ground; the economy needs more than a band-aid, it needs some surgery to make it better, and reducing Rates and Printing Money are not long-term fixes. All that will likely do is to strip the value of the Dollar, great for Forex Traders, but not good for the economic outlook going forwards.
Why not swallow a bitter pill now, accept that contraction has already turned to recession (what is so bad about admitting it?) and get on with building a solid foundation, stop printing Notes that have nothing backing them, look to reduce the debt and not add to it with $600 per person Stimulus Rebates that will likely be spent of overseas Imports, teach the Children how to balance a check-book and start saving, and get back to what made the US so strong; Basics. From a Trader's perspective things look fairly easy to resolve, are we seeing it wrong? I wonder...............
Special credit to TheLFB.com
2002/3 1% Interest Rates, Tax Cuts to jump-start the Economy. Housing in a slump.
2004 A steady climb from the 1% Interest Rates, 0.25% each month, to eventually get to 5.75%. Housing heading higher.
2006 Interest Rates stop getting raised, and unlike most cycles that wait 6 months before lowering again, they are held steady for over a year. No rate cuts, and a Housing Market that is suffering withdrawals as the Interest Rates are held higher.
2007 Interest Rates finally lowered, why it took so long is a question that needs to be asked, the official line was that there were still ‘Inflationary Wage Pressures’ in the economy. Huh? Wage Inflation was not seen by Average Joe! Joe could not walk into work and demand more money each week. The Rate then is dropped from 5.75% to 3% in a real hurry, as if the Fed had a demon on their backs that they had not seen coming. Housing in a complete mess, sub-prime loans not able to be switched to Adjustable Rate Mortgages, or ARMs, because of the lack of liquidity, created by higher Interest Rates than at the time they were taken out.
2008 Looking to drop to 2.25% in March, taking Rates to lows not seen since 2002. Interestingly enough as the Fed Overnight Rates dropped from 5.75% to 3%, and now maybe even down to 2.25%, the average Mortgage Rate has increased from 5.75% to just under 7%. Hmmmmmmm, the only beneficiary of lower Rates here are the lenders and their Balance Sheets.
2009 The Cycle of Boom and Bust starts, and at this rate the 2012 Election will be great timing to say "Well that one didn’t work, we are back in a Bust Cycle again". Somebody has to answer the question, just so it is not allowed to happen again; why were Interest Rates left alone for so long? Lowering now, with raging Inflation, really is akin to saying; we are dropping now because we look bad, no matter the cost in 3 years time, we’d rather act now, and suffer the value of the Dollar getting stripped to the bone as Inflation ravages it.
What a shame that mantra was not in place in 2006/7 when Rates could have been dropped little by little, and liquidity would maybe not have been such a jolt to the system. This is going to be really painful as these lower Rates get paid back over time, and as Inflation takes its toll. It is not as if the consumer is seeing the change in Rates, that will not get reflected for another 9 months yet in economics, and maybe not at all in Mortgage Rates for new Home buyers.
Ouch, this is going to hurt, and NO Mr B, please do not allow the Printing Presses to be fired up again, us U.S. consumers already have enough debt to clear up first it would seem. Why not ride it out and set a stake in the ground; the economy needs more than a band-aid, it needs some surgery to make it better, and reducing Rates and Printing Money are not long-term fixes. All that will likely do is to strip the value of the Dollar, great for Forex Traders, but not good for the economic outlook going forwards.
Why not swallow a bitter pill now, accept that contraction has already turned to recession (what is so bad about admitting it?) and get on with building a solid foundation, stop printing Notes that have nothing backing them, look to reduce the debt and not add to it with $600 per person Stimulus Rebates that will likely be spent of overseas Imports, teach the Children how to balance a check-book and start saving, and get back to what made the US so strong; Basics. From a Trader's perspective things look fairly easy to resolve, are we seeing it wrong? I wonder...............
Special credit to TheLFB.com
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