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Predictions on interest rates over the next 3-5yrs

By BayArea follow BayArea   2021 Jun 12, 12:20pm 350 views   19 comments   watch   nsfw   quote   share    


given where the economy is, pandemic coming to an end, stock market at record levels, inflation concerns...

Where do interest rates go on the next 1,3,5 years and why?
1   B.A.C.A.H.   ignore (1)   2021 Jun 12, 12:28pm     ↓ dislike (0)   quote   flag      

What are yours?
2   BayArea   ignore (1)   2021 Jun 12, 12:31pm     ↓ dislike (0)   quote   flag      

Well, there’s only one direction they can go.

The question is when does that happen and why?

I can’t see it happening in the short term because we are just coming off a pandemic, economy hasn’t yet fully opened back up even though certain sectors are experiencing all time highs (while others are hurting).

But at the same time housing has gone to the moon. I bought a 2500sq fixer upper in the Tri Valley 6mo ago and after $80k renovation have $400k in equity.

So what’s the trigger? I ask because I don’t know and would like to hear some takes on the matter.

TIA!
3   B.A.C.A.H.   ignore (1)   2021 Jun 12, 12:33pm     ↓ dislike (0)   quote   flag      

BayArea says
The question is when does that happen and why?

I keep getting proven wrong about everything, so like you I don't have a clue.

If I thought about and reckoned I'd know what will happen, then it won't happen.
4   Patrick   ignore (1)   2021 Jun 12, 12:56pm     ↓ dislike (0)   quote   flag      

Interest rates cannot be allowed to go up because if they do, the value of bank collateral (houses) will fall and the banks will all be bankrupt.

So the Fed will print and lend that new money at interest rates far below the general inflation rate in order to keep interest rates down.

The Fed lends to banks, and the banks will turn around and lend that money out for mortgages below the inflation rate as well.

People who buy houses will win if their debt is inflated away - meaning if they get raises to compensate for inflation. I'm not sure that will happen though.
5   FuckCCP89   ignore (6)   2021 Jun 12, 12:58pm     ↓ dislike (0)   quote   flag      

B.A.C.A.H. says
I keep getting proven wrong about everything, so like you I don't have a clue.


Me three.
6   clambo   ignore (5)   2021 Jun 12, 3:54pm     ↓ dislike (0)   quote   flag      

I’m guessing that interest rates will not change too much.

However, it’s scary how much debt spending is going on lately.

This could make interest rates rise. Too much debt (bonds) for sale may make their price fall, so that they are paying higher yields.

I could be entirely wrong.
7   RC2006   ignore (2)   2021 Jun 12, 3:59pm     ↓ dislike (0)   quote   flag      

If we look at Japan they can be kept low for decades.
8   PeopleUnited   ignore (1)   2021 Jun 12, 4:21pm     ↓ dislike (0)   quote   flag      

RC2006 says
If we look at Japan they can be kept low for decades.


This. In fact in Japan they even have multigenerational loans to pay off the overpriced real estate via 100 year debt slavery.
9   Hircus   ignore (0)   2021 Jun 12, 4:23pm     ↓ dislike (0)   quote   flag      

PeopleUnited says
via 100 year debt slavery.


holy shit, they really do (or did) have 100yr mortgages!
10   stfu   ignore (0)   2021 Jun 12, 4:44pm     ↓ dislike (0)   quote   flag      

My opinion:

Interest rates stay low for the next 3 years. No idea beyond that.

My reasoning :

Until wages increase at a sustained rate for a sustained period of time we won't have inflation. Wages are the foundation of inflation and deflation. We should have had massive deflation in my lifetime because of the slowing growth in wages and the massive jump in productivity. The reason we have not seen this is the Fed. The true mandate of the FED is to stave off deflation at all costs so that banks can lend at a profit. They have not been entirely successful and there's no reason to think that their tools will be any more successful this time around.

Yes the feds have created trillions which has increased liquidity but not necessarily velocity. The truth is that there are few productive outlets for capital and there won't be until there is massive debt destruction and the feds trillions are deleted from the economy. All that liquidity is sitting or worse being put to unproductive uses and ultimately this debt will be destroyed because it cannot generate a positive return. Does the country really need another upscale ice cream franchise? No, but we sure could use a new nuclear plant or steel plant or any type of investment that generates new and higher wages. It's a virtuous cycle.

Every article on the economy I've read this week talks about how inflation is finally here to stay. I don't buy it. I think what we are seeing now is (agreeing with the fed) transitory and is more from a supply/ demand imbalance than an inflationary trend. Right now demand is outstripping supply because of the cargo/ logistic situation due to covid and also because of the sheer number of people who, between paying no rent and receiving stimmy checks, have thousands in their bank accounts for the first time in their lives. It will pass and it will pass soon.

I read an article at zero hedge this morning that 20% of single family homes are being purchased by investors who are paying over market. To me this is a huge neon sign telling me that capital is looking for a productive outlet and cannot find one. To me that's deflationary and thus interest rates will not increase.
.
11   HunterTits   ignore (4)   2021 Jun 12, 5:10pm     ↓ dislike (0)   quote   flag      

RC2006 says
If we look at Japan they can be kept low for decades.


US is not Japan.
12   porkchopexpress   ignore (0)   2021 Jun 13, 3:54pm     ↓ dislike (0)   quote   flag      

Yellen and Powell are already talking about raising rates
13   gabbar   ignore (0)   2021 Jun 13, 4:02pm     ↓ dislike (0)   quote   flag      

stfu says
Right now demand is outstripping supply because of the cargo/ logistic situation due to covid and also because of the sheer number of people who, between paying no rent and receiving stimmy checks, have thousands in their bank accounts for the first time in their lives. It will pass and it will pass soon.


I have read articles that indicate a lot of people don't have more than 1k in their bank accounts or can't come up with 2k in an emergency; is this true? I can't imagine living in this circumstance.
14   Hircus   ignore (0)   2021 Jun 13, 4:39pm     ↓ dislike (0)   quote   flag      

gabbar says
stfu says
Right now demand is outstripping supply because of the cargo/ logistic situation due to covid and also because of the sheer number of people who, between paying no rent and receiving stimmy checks, have thousands in their bank accounts for the first time in their lives. It will pass and it will pass soon.


I have read articles that indicate a lot of people don't have more than 1k in their bank accounts or can't come up with 2k in an emergency; is this true? I can't imagine living in this circumstance.


This article actually has some detail about it.
https://www.gobankingrates.com/saving-money/savings-advice/americans-have-less-than-1000-in-savings/



I've always suspected this headline was produced by being pedantic about "how much money do you have in a SAVINGS account?"

I personally don't have any - I keep my money in my checking account, or investments. So, I probably fall into the "american who doesnt have any money in a savings account".

I mean, look at the Ages 55-64 group - combine the $0 and under $1000 groups. That's 66% of americans in that age group. It just doesn't seem real to me, and this is why I think they're exploiting details to make juicy headlines.

I haven't seen the "come up with 2k in an emergency" article, but that sounds like a more realistic measure.

From another article. Although, net worth can easily, and is likely, mostly tied up in assets.
15   Rin   ignore (9)   2021 Jun 13, 4:47pm     ↓ dislike (0)   quote   flag      

Hircus says

I personally don't have any - I keep my money in my checking account, or investments.


I have a hard time believing that those articles are so dumb that they forgot all about checking accounts, as a pure savings accounts doesn't pay anymore in interest unless it's a long term CD.
16   gabbar   ignore (0)   2021 Jun 13, 4:52pm     ↓ dislike (0)   quote   flag      

Hircus says
they're exploiting details to make juicy headlines.


You are right. We live in a matrix; its hard to believe almost anything at face value.
17   gabbar   ignore (0)   2021 Jun 13, 5:27pm     ↓ dislike (0)   quote   flag      

Rin says
Hircus says

I personally don't have any - I keep my money in my checking account, or investments.


I have a hard time believing that those articles are so dumb that they forgot all about checking accounts, as a pure savings accounts doesn't pay anymore in interest unless it's a long term CD.


They want to create a false sense of poverty and fear; makes the masses easier to control and manipulate and distracted from more important problems.
19   WookieMan   ignore (6)   2021 Jun 14, 4:15am     ↓ dislike (0)   quote   flag      

Hircus says
I mean, look at the Ages 55-64 group - combine the $0 and under $1000 groups. That's 66% of americans in that age group. It just doesn't seem real to me, and this is why I think they're exploiting details to make juicy headlines.

Headlines are for clickbait for sure, but it mostly is true in my opinion. There's a large segment of the population in inner cities that cannot pay for housing or food. At my previous employer, most our tenants were broke. I can almost promise you 1/3 of Chicago's population has nothing in a checking account, savings, CD or investments. Don't have a link to support that, but having worked in the city for about 15 years, I have a pretty good feel for it.

Then there's rural America with trailer parks. Most those people don't have any money. Places like Alabama, Mississippi, Arkansas, etc.

Then there's suburbs and seemingly great areas and the adults have CC's maxed out to the gills and have nothing in savings because they just buy shit. Also some are government workers and just rely on their pension and don't save.

The stats could be correct even if you include checking accounts, savings and CD's. Remember the vast majority of the population has no skills really. It's likely most here on patnet don't mingle with the poor (outside of any charity work) as everyone clearly has an electronic device to post and pretty much everyone can post a logical comment with decent grammar.

Out of maybe 800 rental screenings (maybe more), I'd never hire one of them for any task for anything I know how to do, even half assed. America is great for those that want to get after it, but there's a huge segment of the population that simply doesn't care, abuses substances, etc. And the doers have to pay more to compensate that, making it harder for them to save.

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