(HPI here is House Price Index)
Will move to econ section to see if I get the bite I'm looking for.
Topic: What happens in the US if ARM rates increase >4x? (Read 695 times)
(HPI here is House Price Index)
Will move to econ section to see if I get the bite I'm looking for.
Problem with government policy of encouraging debt and bail out of debtor at the huge expense of saver and responsible citizen.
At the same time, because US is such a huge import country and debtor at the global stage, we are pissing off every creditor nation in the world.
We need to let people go bankrupt and start fresh.
At the same time, because US is such a huge import country and debtor at the global stage, we are pissing off every creditor nation in the world.
We need to let people go bankrupt and start fresh.
^ yup.
Any thoughts? I'd see it leading to a kind of "soft reset," where we go back to a heavy savings economy after plenty more Detroit situations and massive losses in cities' municipal bonds, failure of more banks than the USG can handle, and movement of assets back into PMs, lower-risk corporate bonds, and possibly even BTC. I don't see "true" hyperinflation (50%+ YoY) or collapse of the USG, but definitely a kind of paradigm shift among citizens, probably without violent civil unrest, but with a strong move away from the incumbency advantage US politicians see, at least for a few election cycles. I also see it as a landmark time where the youth rejects the boomer generation's way of doing things, with movements similar to the Yippies. Whether this is "good" or "bad," I have no idea. I'd guess it'd be co-opted and we do the same things, just with different terminology, but I'm a cynic.
housing prices are set based on what people can pay monthly. What scared me before the first crisis was the 1% two year teaser rates... take an average american that can pay 2000 per month for a mortgage. see what the total house mortgage they can afford at 1% is. then put in 9% (the 50 year average of mortgage rates). That is what houses could crash to in value.Any thoughts? I'd see it leading to a kind of "soft reset," where we go back to a heavy savings economy after plenty more Detroit situations and massive losses in cities' municipal bonds, failure of more banks than the USG can handle, and movement of assets back into PMs, lower-risk corporate bonds, and possibly even BTC. I don't see "true" hyperinflation (50%+ YoY) or collapse of the USG, but definitely a kind of paradigm shift among citizens, probably without violent civil unrest, but with a strong move away from the incumbency advantage US politicians see, at least for a few election cycles. I also see it as a landmark time where the youth rejects the boomer generation's way of doing things, with movements similar to the Yippies. Whether this is "good" or "bad," I have no idea. I'd guess it'd be co-opted and we do the same things, just with different terminology, but I'm a cynic.
we are slowly making the situation better. there are no 1% mortgages. so it is really the difference in the value of the payment stream from about 3.5% to about 8% that housing could correct to. after the bounce back to the norm curve, most housing markets will not be great long term investments.
The way I see it, we haven't been pricing in inflation properly, as seen by the very weak CPI increases while actual M2 inflation has been fairly extreme. If the USG is unable to get inflation to "vent" into CPI, it's going to explode.
ETA: OTOH, if you're able to weather the possible depression and real housing crisis (assuming there is one), especially with a fixed-rate mortgage (assuming the financial institution doesn't go bankrupt), there's a fair chance you'll be very wealthy since your "debt" will be decreasing 10-15% in value each year.
^ yup.
Any thoughts? I'd see it leading to a kind of "soft reset," where we go back to a heavy savings economy after plenty more Detroit situations and massive losses in cities' municipal bonds, failure of more banks than the USG can handle, and movement of assets back into PMs, lower-risk corporate bonds, and possibly even BTC. I don't see "true" hyperinflation (50%+ YoY) or collapse of the USG, but definitely a kind of paradigm shift among citizens, probably without violent civil unrest, but with a strong move away from the incumbency advantage US politicians see, at least for a few election cycles. I also see it as a landmark time where the youth rejects the boomer generation's way of doing things, with movements similar to the Yippies. Whether this is "good" or "bad," I have no idea. I'd guess it'd be co-opted and we do the same things, just with different terminology, but I'm a cynic.
housing prices are set based on what people can pay monthly. What scared me before the first crisis was the 1% two year teaser rates... take an average american that can pay 2000 per month for a mortgage. see what the total house mortgage they can afford at 1% is. then put in 9% (the 50 year average of mortgage rates). That is what houses could crash to in value.Any thoughts? I'd see it leading to a kind of "soft reset," where we go back to a heavy savings economy after plenty more Detroit situations and massive losses in cities' municipal bonds, failure of more banks than the USG can handle, and movement of assets back into PMs, lower-risk corporate bonds, and possibly even BTC. I don't see "true" hyperinflation (50%+ YoY) or collapse of the USG, but definitely a kind of paradigm shift among citizens, probably without violent civil unrest, but with a strong move away from the incumbency advantage US politicians see, at least for a few election cycles. I also see it as a landmark time where the youth rejects the boomer generation's way of doing things, with movements similar to the Yippies. Whether this is "good" or "bad," I have no idea. I'd guess it'd be co-opted and we do the same things, just with different terminology, but I'm a cynic.
we are slowly making the situation better. there are no 1% mortgages. so it is really the difference in the value of the payment stream from about 3.5% to about 8% that housing could correct to. after the bounce back to the norm curve, most housing markets will not be great long term investments.
^ yup.
Any thoughts? I'd see it leading to a kind of "soft reset," where we go back to a heavy savings economy after plenty more Detroit situations and massive losses in cities' municipal bonds, failure of more banks than the USG can handle, and movement of assets back into PMs, lower-risk corporate bonds, and possibly even BTC. I don't see "true" hyperinflation (50%+ YoY) or collapse of the USG, but definitely a kind of paradigm shift among citizens, probably without violent civil unrest, but with a strong move away from the incumbency advantage US politicians see, at least for a few election cycles. I also see it as a landmark time where the youth rejects the boomer generation's way of doing things, with movements similar to the Yippies. Whether this is "good" or "bad," I have no idea. I'd guess it'd be co-opted and we do the same things, just with different terminology, but I'm a cynic.
Any thoughts? I'd see it leading to a kind of "soft reset," where we go back to a heavy savings economy after plenty more Detroit situations and massive losses in cities' municipal bonds, failure of more banks than the USG can handle, and movement of assets back into PMs, lower-risk corporate bonds, and possibly even BTC. I don't see "true" hyperinflation (50%+ YoY) or collapse of the USG, but definitely a kind of paradigm shift among citizens, probably without violent civil unrest, but with a strong move away from the incumbency advantage US politicians see, at least for a few election cycles. I also see it as a landmark time where the youth rejects the boomer generation's way of doing things, with movements similar to the Yippies. Whether this is "good" or "bad," I have no idea. I'd guess it'd be co-opted and we do the same things, just with different terminology, but I'm a cynic.
I believe USG = US Government.
You're talking about organisations and using acronyms I've never heard of, USG? The only people who have a real impact on the U.S economy are the Federal Reserve and they're determined to keep interest rates below 1% and destroy savings.
There are four main powers in the western world that I know for certain directly affect the western economies:
. Federal Reserve
. International Monetary Fund
. European Central Bank
. Bank of England
All of these organisations control the printing presses for their respective paper money and sell bonds etc. the rest are just regulatory bodies, intermediaries or umbrella companies that are owned by them and get their currency from these people.
There are four main powers in the western world that I know for certain directly affect the western economies:
. Federal Reserve
. International Monetary Fund
. European Central Bank
. Bank of England
All of these organisations control the printing presses for their respective paper money and sell bonds etc. the rest are just regulatory bodies, intermediaries or umbrella companies that are owned by them and get their currency from these people.
Situation back story:
USD has been repeatedly failing to meet Fed target rates for consumer-realized inflation while M2 soars ~6-10% YoY. Consumers are relatively unaffected but still widely complaining of increasing prices at the supermarket.
Situation:
Within two years, the US economy is declared "recovered" and faces consumer realization of inflation after pumping up the money supply since the recession started (and prior). Consumer-realized inflation does occur, and in response to the citizen protests, USG raises Fed rate to 10% over a couple years. ARMs shoot up to 12.5%, a financially dire situation compounded with consumer-realized inflation of 10-15% annually, forcing many out of their current residences.
What happens next? Is there an exodus from suburbs and urban areas to rural areas, do ARM rate hikes lead to a worse housing crisis than recently experienced, does government try to step in with an even more ambitious budget aimed at curtailing the trend, or does everyone head straight to the Apple-sponsored high-tech tent cities? ("they all use bitcoin and hooray" is not a valid response
)
Pointing out flaws in the premise would be appreciated, too. I'm no expert.
USD has been repeatedly failing to meet Fed target rates for consumer-realized inflation while M2 soars ~6-10% YoY. Consumers are relatively unaffected but still widely complaining of increasing prices at the supermarket.
Situation:
Within two years, the US economy is declared "recovered" and faces consumer realization of inflation after pumping up the money supply since the recession started (and prior). Consumer-realized inflation does occur, and in response to the citizen protests, USG raises Fed rate to 10% over a couple years. ARMs shoot up to 12.5%, a financially dire situation compounded with consumer-realized inflation of 10-15% annually, forcing many out of their current residences.
What happens next? Is there an exodus from suburbs and urban areas to rural areas, do ARM rate hikes lead to a worse housing crisis than recently experienced, does government try to step in with an even more ambitious budget aimed at curtailing the trend, or does everyone head straight to the Apple-sponsored high-tech tent cities? ("they all use bitcoin and hooray" is not a valid response
)Pointing out flaws in the premise would be appreciated, too. I'm no expert.
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