Goodbye Housing Market

[jyl]

Kiss the housing market goodbye.

The US is headed toward another Reagan-esque surge of much higher federal government spending and tax cuts. This means much higher federal deficits e.g. federal debt tripled under Reagan.

Large increases in federal deficit, from the current situation of historical low interest rates, means large increases in interest rates. 10 year Treasury yields have risen from 1.70% to 2.25% in a few weeks, which is a very fast increase. About $2TR was pulled from bond market in the past week. Mortgage rates have jumped from near 3% to 4.125%.

Large increases in federal spending and large deficits, from the current situation of near full employment, means higher inflation. There is still under-utilized capacity in manufacturing, but there is little under-utilized capacity in the labor market - at least, the part of the labor market that is actually employable. Any incremental trade barriers will also boost inflation. Wages started rising significantly in 2015 and measured inflation is starting to rise.

Large increases in the federal deficit and increased inflation will push interest rates still higher. I don't think we'll see 20% rates like before, but I expect to see rates much higher than today.

Everyone knows what higher mortgage rates, from the current situation of already high house prices, will mean.

[KFC911]

Makng America great again

Time will tell...it's not gonna be pretty imo...

[Bill Douglas]

I'm guessing the housing market in Mexico is set to boom. What with Jose and his mates moving there...

[Don Ro]

"Wages started rising significantly in 2015..."
.
.
How "significantly"? Have data?

[Tervuren]

Originally Posted by jyl

The US is headed toward another Reagan-esque surge of much higher federal government spending and tax cuts. This means much higher federal deficits e.g. federal debt tripled under Reagan.

There is one difference you may have overlooked. It wasn't Reagan that raised the spending. That is controlled by congress:

Reagan's House of representatives:

97th Congress 1981-1983
Democrats 242
Republicans 192

Who controlled the budget for this period? The Democrats! The increase in spending here is the legislation and spending created by the democrats.

Ok, lets move on.

98th Congress 1983-1985
Democrats 269
Republicans 166

Who controlled the budget for this period? The Democrats! The increase in spending here is the legislation and spending created by the Democrats.

99th Congress 1985-1987
Democrats 253
Republicans 182

Who controlled the budget for this period? The Democrats! The increase in spending here is the legislation and spending created by the Democrats.

100th Congress 1987-1989
Democrats 258
Republicans 177

Who controlled the budget for this period? The Democrats! The increase in spending here is the legislation and spending created by the Democrats.

All federal taxes have to start in the house of Representatives. This why in 2011 when the house went from Blue to Red, that the deficit gap stopped accelerating as hard.

Whats really bizzare, is some people only start bringing up the deficit after the president changes party. Its like it didn't matter before. If you look at campaign spending of Trump vs the Blue's, if that same effectiveness can be applied to government spending, yet still getting the results, then there won't be a widening deficit. Time will tell.

We have a health care situation designed to bring about the destruction of our past system. That will be a very difficult issue for the economy to overcome. Keep in mind we have had a period where our politicians have been relying on the stupidity of the American voter. We were so stupid we re-elected some of the clowns behind this. Are we still this stupid? Probably.

[ppetion]

hm... but when it comes to the past few years, its Obama Obama Obama? who controlled the house and congress for the past 8 years? we are just full of it!

[NoRush993/951]

I wouldn't get too worried about interest rates. The traders need volatility in order to make a living. They get everyone leaning one way and then whack them. Rinse and repeat.
Oil is the the price to watch. That creates the closet to stuff the new credit dollars around the planet. It's all about new credit issuance.

[onewhippedpuppy]

PARF? Hasn't the largest single increase in the deficit ever occurred over the last 8 years?

[wrpeterson]

I guess the question to ask is: "How many budgets has the Congress passed in the last 8 years?" The answer is certainly less than 8 - much of the spending has been via deals and continuing resolutions. CRAs do nothing to *decrease* spending - they just keep in place previously agreed-to levels.

[Chocaholic]

Little under-utilized capacity in the labor market? Really? Are you talking about here in the US on planet Earth?

Sorry, your doom and gloom assumptions are based on erroneous assumptions not founded in reality. But otherwise, very astute.

[jyl]

Originally Posted by Tervuren

There is one difference you may have overlooked. It wasn't Reagan that raised the spending. That is controlled by congressl

Stop trying too make this economic thread into a political one. I didn't post about who decides to raise federal spending and cut taxes, I'm talking about the economic results.

[KFC911]

It's Bush's fault

I can't help it John...well, I can...but didn't want too...

[jyl]

Originally Posted by Chocaholic

Little under-utilized capacity in the labor market? Really? Are you talking about here in the US on planet Earth?

Sorry, your doom and gloom assumptions are based on erroneous assumptions not founded in reality. But otherwise, very astute.

Yes, that is what I'm saying.

The unemployment rate (UE) is under 5%. That is close to full employment.

Sure, the U6 rate that includes people who are not looking for a job as well as people who are part-time but wish they were full-time, is 9.5%. That's not that far from the very lowest level of U6 before the last recession (8%). And many of those people are unemployed because they are not actually employable. Ask the business owners here on Pelican how hard it is to find a qualified, dependable, non-drug using, non-criminal record, employee today. The business owners I talk to tell me that is their number one problem. The economy is changing. Unskilled people, people who have been out of the work force for years, people with legal or substance abuse history, people without basic work ethic - U6 assumes they are actually employable, but in reality they are not.

http://www.macrotrends.net/1377/u6-unemployment-rate

[Por_sha911]

Originally Posted by KC911

Makng America great again

Most people wait until after the President-elect is sworn into office before they blindly start blaming them for everything and anything so as to not appear to be biased and narrow minded.

Originally Posted by KC911

It's Bush's fault

You're behind the times. It's President-elect Trump's fault. Blaming Bush is so 2008-2015.

[ficke]

Originally Posted by jyl

Stop trying too make this economic thread into a political one. I didn't post about who decides to raise federal spending and cut taxes, I'm talking about the economic results.

I guess you missed his point or I am missing yours, so why do you think spending will go up? and taxing will go down.
Or are you just doing a "what if?" thread.
Since there is no known factual reason for the economic changes your suggesting.

[KFC911]

The economy, unemployment, etc. have been doing quite nicely around here the past few years, since the surplus housing was finally cleared 2-3 years back. Booming actually...and we were hit hard UE wise 8 years ago. The debt is a problem for sure, but in general, I say the recovery has been better than I could have imagined back then....if you don't watch the political ads .

[jyl]

Originally Posted by Don Ro

"Wages started rising significantly in 2015..."
.
.
How "significantly"? Have data?

Wage growth averaged nearly 5% year over year in 2015 and has been running a little under 4% in 2016.

United States Wages and Salaries Growth | 1960-2016 | Data | Chart

Why do you think corporate profit margins have been down year over year for the past year?. Wages rise, labor gets a larger share of profit.

[KFC911]

Originally Posted by Por_sha911

Most people wait until after the President-elect is sworn into office before they blindly start blaming them for everything and anything so as to not appear to be biased and narrow minded.


You're behind the times. It's President-elect Trump's fault. Blaming Bush is so 2008-2015.

It's Obama's fault then

See my previous post...

[jyl]

Originally Posted by ficke

I guess you missed his point or I am missing yours, so why do you think spending will go up? and taxing will go down.
Or are you just doing a "what if?" thread.
Since there is no known factual reason for the economic changes your suggesting.

Have you been paying attention to the statements, plans, and platforms from Washington DC?

- "Huge" infrastructure spending promised. Also defense.
- "Massive" tax cuts promised (corporate from 35% to 15%, top individual from 40% to 33%, estate tax to 0%).

Why do you think construction, materials, defense stocks have soared?. Why do you think bond prices have plunged?

[jyl]

Originally Posted by KC911

It's Bush's fault

I can't help it John...well, I can...but didn't want too...

You stop it too.

The problem with trying to discuss economic issues here is that people keep trying to make it into a political thread. Go to PARF if you want to do that. In this thread, I literally do not care who is doing what, what I'm posting about is what the consequences will be.