We spend 45000 a year per poor person to help them. The pentagon bought 250 million worth of airfare and never used it. Boy, our government sure is efficient! Personally I think the govt should go back to the way it was in 1920. It has been growing quickly ever since 1945 and it is a big pile of shit now. Anything beyond national defense, necessary public goods, and private property rights is a god damn waste that sucks away a huge amount of valuable resources. Everything else should be privitized. I could only imagine how much better our country could be if that happened.
Well, let me put it this way: The economy as you put it is you. Yes, you. I would guess that your main concern would be: * your job stability, then * your pay, then * what you can do with your pay, then * how much do you owe. * Lastly, the benefits system which surrounds you and your family: medicare, social security, roads, police.... I would also add that you need to consider two opposing forces: * the producer, which likes inflation, a lot of money chasing fewer goods, buys cheap, sells with inflated prices later on, and * the banker, he fights to be able to buy the same amount of goods in the future with the dollars he recovers later on from today's loans. So, inflation, for instance would be good for you if you were heavily indebted, credit cards, mortgage... It would probably be good for your employer, unless you work for a Bank... And, so on.... You can figure the rest. My point, it's an individual case by case issue. Undoubtedly, it's better to have people with money surrounding you. Or, an economy with a lot of money and low interest rates. The trouble arises when these resources are inefficiently allocated. Or, in other words, some idea didn't pan out, was out of timing, or, the money is spent in Vegas... Gotta run......
This analysis doesn't work for most consumers because most conusmer debt is in the form of variable interest. Especially considering about 80% of home loans are variable in some way and credit cards are adjusted to prime. Also the great majority of homeowners have fully adjustable HELOCs as seconds. If inflation stays high, nominal rates will increase to cover the banks on these loans. Regardless of what real rates do, the nominal rates will increase and be felt by the consermer, especially when wage growth is almost non-existent.
forget about economics for trading if you think about it there are always economic reasons to short and economic reasons to go long. there are guys with econometric models but i still have to see one that makes sense for a little guy, i mean one that does not return just 4% a year. just focus in a few variables and backtest on your own that is much more rewarding than listening to economic talking heads who are usually pushing an agenda rather than trying to make accurate forecasts.
I can cut my cards, and return them to the bank, if I don't agree with a rate increase. Most mortgages are variable?? I doubt it. I would like to see a reference to this. Thx.
Not if they have high balances like most Americans....... As far as the mortgages go, I worked in that industry in the past. I can honestly say I saw as many interest-only loans as fixed, and the vast majority were ARMs. Also, Irwin Kellner (CBS Marketwatch) states 80% of seconds are variable. The 80% statement was a typo......though most new mortgages are variable, it's not that high. Regardless, I'll find you a link.
So, if a few investments have negative or no return, you get a downturn. If, the downturn is big, because of the multiplying effects of credit, for instance, you get a big hole or contraction in the money circulating: a recession. Since there's little money to go around, people have, at times, tried to get it from their banks. But, how stupid of you to ask for --your-- money from a trusted and prestigious bank, they lent it, it's not there... So, here comes the saviours of the unprotected, the central banks of the world, or your local Fed, pouring the missing bills into the vaults of your treacherous (no misspelling...) bank. Lowering reserve levels, discount, fed rates, you name it... The multiplying effects are 10x and more., 20x... The system is flooded with money. Unfortunately, easy money, means poor investments in the short run. And you get to start the business cycle all over again. Did I mention that the banks made a killing playing the spreads, while everybody was choking under a recession... Wonder how that happened?? Maybe it's because cb's are private banks chartered to protect banks, not the little guy!! Add to this the war (700+ billion) --> government deficit. Add to this China (the black hole of production synergy) --> trade deficit Add to this that oil is mostly produced abroad.... (in very unstable places: Venezuela, Saudi Arabia, Nigeria, Russia....) You get the picture: it ain't looking very pretty. This bounce out of the recession looks more to me like a dead cat bounce. But, getting to the specifics of your question: Oil up --> production down --> oil down --> production up?? maybe. The problem with our economy in recent years is that it wouldn't be that bad if we had inflation. The trouble is, that the dollars are ending in the Arab countries, Japan, China... And, not in our economy, as the trade deficit clearly shows, which dries up the well of our economy... Having thrown so many stones at the Fed, I do recognize that they have done an incredible job of placing their notes at negative real rates. Therefore, easing in great amount the pain of this last recession to all of us. Foreign cb's are footing the bill. Have they stopped already? Some suggest they have, which doesn't help much to the overall picture... To end the litany, an advice: short the dollar!! buy oil!!
What????? As prices go up, firms have more of an interest in selling more of these things, they get more money for the same stuff. It is demand that goes down, supply will go up forever if the demand is there at higher prices. If oil is expensive, you better believe all the drillers are out there drilling as much as they can and selling as much as they can at the higher prices. All suppliers have a vested interest in producing more of the product if the price is higher.
Maybe they were smart, and took ARM's through the downward slope of rates. But, now that the slope started climbing, what will keep them from changing their variable interest mortgage to fixed rate, including their cc debt? Anyhow, my point was that the individual has to review his particular situation, in order to determine if the turns in the economy are positive or negative to him.
With regards to the ARM stuff, I found the source of my information. It was regarding speculative markets. California and D.C have conforming ARM percentages over 50%. However, the total number of conforming and jumbo loans in fixed terms is around 55%. Also, remember that most subprime loans are ARMs. Data taken from FHFA.