4 ms·

I hope everyone enjoyed the generation (1995-2022) of abnormally low rates, you won't be seeing that again How did we avoid inflation for so long during this l

by newaccount2021 4y ago

I hope everyone enjoyed the generation (1995-2022) of abnormally low rates, you won't be seeing that again How did we avoid inflation for so long during this low-rate regime? In 1870 we had the same issue - deflation in the face of money creation...the industrial revolution was happening at the same time which ate up all the money in productivity gains. For our era, it was China. Chinese manufacturing kept things cheap even as we printed and printed. That's over too. Get ready to be poorer, there is no alternative scenario...Americans are just going to be poorer.

bushbaba 4y ago
Flip side. Americans could see (near-fully automated) manufacturing return as china is no longer cheaper.
- indymike 4y ago
  Here in the midwest that is exactly what is happening.
- Fargren 4y ago
  Wouldn't manufacturing tend to move to the next cheapest place, rather than to the USA? Not that I know where that would be, maybe India or Latin America?
  - mjevans 4y ago
    The south-east Asia countries near China or maybe costal areas of Africa? It would help if they have a stable government and resistance to climate change.
  - spaceman_2020 4y ago
    Way more complicated than simply "next cheaper place". Modern manufacturing has long, really, really long supply chains. You also need a mix of labor (low-end, mid-range, high-end). The Chinese-focused East-Asian manufacturing worked because you could get mid-range labor from China/Malaysia, low-end from interior parts of China/Vietnam/Bangladesh, and high-end labor from Korea, Taiwan, and Japan. Latin America is a good candidate because of the easy availability of raw materials and short supply lines to America. But their internal stability is a huge problem.
paulpauper 4y ago
more likely inflation will fall again
pkaye 4y ago
US has one of the lowest imports to GDP ratio. Its not as trade dependent as other countries. https://data.worldbank.org/indicator/NE.IMP.GNFS.ZS?most_recent_value_desc=false https://data.worldbank.org/indicator/NE.IMP.GNFS.ZS?most_rec...
roflyear 4y ago
Doubtful rates will go to 10%. Look at the ten year and the twenty year bond prices.
rhexs 4y ago
If we’re poorer but I can actually afford to buy a house, sign me up. Low interest rates do nothing except turn every market into a casino. Place I wanted to retire to went from 800K, which is attainable, to 2.1 million in the last two years. Bring on the high interest rates. (Good luck though, high interest rates kill nearly every sacred cow in politics)
- nly 4y ago
  Careful what you wish for. It's entirely possible that increased rates will depress house prices but, on balance, houses still get less affordable. That $2.1M house might go down to $1.5M, but if rates go from 6% to 10% you'll be paying more each month (assuming 20% down, borrowing over 30 years) Worse, if prices continue to sink you'll be trapped in negative equity.
  - rhexs 4y ago
    You’re correct that the average American non-saver can afford less house with high interest rates. This would be good news for savers however.

bushbaba 4y ago

Flip side. Americans could see (near-fully automated) manufacturing return as china is no longer cheaper.

indymike 4y ago
Here in the midwest that is exactly what is happening.
Fargren 4y ago
Wouldn't manufacturing tend to move to the next cheapest place, rather than to the USA? Not that I know where that would be, maybe India or Latin America?
- mjevans 4y ago
  The south-east Asia countries near China or maybe costal areas of Africa? It would help if they have a stable government and resistance to climate change.
- spaceman_2020 4y ago
  Way more complicated than simply "next cheaper place". Modern manufacturing has long, really, really long supply chains. You also need a mix of labor (low-end, mid-range, high-end). The Chinese-focused East-Asian manufacturing worked because you could get mid-range labor from China/Malaysia, low-end from interior parts of China/Vietnam/Bangladesh, and high-end labor from Korea, Taiwan, and Japan. Latin America is a good candidate because of the easy availability of raw materials and short supply lines to America. But their internal stability is a huge problem.

paulpauper 4y ago

more likely inflation will fall again

pkaye 4y ago

US has one of the lowest imports to GDP ratio. Its not as trade dependent as other countries. https://data.worldbank.org/indicator/NE.IMP.GNFS.ZS?most_recent_value_desc=false https://data.worldbank.org/indicator/NE.IMP.GNFS.ZS?most_rec...

roflyear 4y ago

Doubtful rates will go to 10%. Look at the ten year and the twenty year bond prices.

rhexs 4y ago

If we’re poorer but I can actually afford to buy a house, sign me up. Low interest rates do nothing except turn every market into a casino. Place I wanted to retire to went from 800K, which is attainable, to 2.1 million in the last two years. Bring on the high interest rates. (Good luck though, high interest rates kill nearly every sacred cow in politics)

nly 4y ago
Careful what you wish for. It's entirely possible that increased rates will depress house prices but, on balance, houses still get less affordable. That $2.1M house might go down to $1.5M, but if rates go from 6% to 10% you'll be paying more each month (assuming 20% down, borrowing over 30 years) Worse, if prices continue to sink you'll be trapped in negative equity.
- rhexs 4y ago
  You’re correct that the average American non-saver can afford less house with high interest rates. This would be good news for savers however.