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> Interest rates and vehicle prices too high, must come down I'm still a bit surprised how many people, even professionals in the lending space, hold this view

> Interest rates and vehicle prices too high, must come down I'm still a bit surprised how many people, even professionals in the lending space, hold this view that "interest rates must fall!" We're still relatively low for federal interest rate[0]. Near zero interest rates are not sustainable long term and have lead to a tremendous asset bubble we're still just figuring out the consequences of. It's a bit frightening that the only solution most companies have to improving their future out look boils down to "wait for rates to drop". I suspect even if rates do drop again, it will be only for a brief while before it becomes clear that "print free money!" is not a long term viable economic strategy. 0. https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS

alephnerd 3y ago
> I'm still a bit surprised how many people, even professionals in the lending space, hold this view that "interest rates must fall!" Because it's mostly high earning white collar professionals or anyone with at least $100k in liquid assets who benefit from an interest rate drop. If rates drop significantly, then house sale prices skyrocket again because you can take out larger loans with a smaller down payment, and you can leverage yourself to acquire multiple properties. Same with car sales, and any other luxury good.
zdragnar 3y ago
When the price of the car tops out around that of a house in a low cost of living area, low interest rates make the price seem less obscene. With higher rates than before (and more competition), the price is too high, no matter how you shake it.
toomuchtodo 3y ago
American consumers run on credit because of wage stagflation in the face of inflation and price levels. Either wages must go up or credit costs must come down to improve affordability if prices aren’t coming down. Securing wage increases takes time, worker organizing, etc. credit affordability is as easy as Chair Powell holding a press conference. https://www.marketplace.org/2023/02/08/americans-use-of-credit-is-growing-but-slowing/ https://www.marketplace.org/2023/02/08/americans-use-of-cred... https://www.federalreserve.gov/releases/g19/current/default.htm https://www.federalreserve.gov/releases/g19/current/default....
aidenn0 3y ago
> We're still relatively low for federal interest rate[0]. Near zero interest rates are not sustainable long term and have lead to a tremendous asset bubble we're still just figuring out the consequences of. My house is still likely to go for more than I paid for it in 2018, even after adjusting for inflation. It should be obvious that housing cannot sustainably rise at above-inflation rates indefinitely.
state_less 3y ago
I’m not sure why people think interest rates will go down if we’re running 3%+ (50%+ above target) inflation and unemployment is below 5%. I don’t care what the projections are, the rates won’t drop until inflation is below 3% or unemployment shoots up. If they did drop the rates in these conditions, it would signal a failure of the FEDs dual mandate. My prediction is that rates stay the same or even are raised if inflation continues to run hot while unemployment is down.

alephnerd 3y ago

> I'm still a bit surprised how many people, even professionals in the lending space, hold this view that "interest rates must fall!" Because it's mostly high earning white collar professionals or anyone with at least $100k in liquid assets who benefit from an interest rate drop. If rates drop significantly, then house sale prices skyrocket again because you can take out larger loans with a smaller down payment, and you can leverage yourself to acquire multiple properties. Same with car sales, and any other luxury good.

zdragnar 3y ago

When the price of the car tops out around that of a house in a low cost of living area, low interest rates make the price seem less obscene. With higher rates than before (and more competition), the price is too high, no matter how you shake it.

toomuchtodo 3y ago

American consumers run on credit because of wage stagflation in the face of inflation and price levels. Either wages must go up or credit costs must come down to improve affordability if prices aren’t coming down. Securing wage increases takes time, worker organizing, etc. credit affordability is as easy as Chair Powell holding a press conference. https://www.marketplace.org/2023/02/08/americans-use-of-credit-is-growing-but-slowing/ https://www.marketplace.org/2023/02/08/americans-use-of-cred... https://www.federalreserve.gov/releases/g19/current/default.htm https://www.federalreserve.gov/releases/g19/current/default....

aidenn0 3y ago

> We're still relatively low for federal interest rate[0]. Near zero interest rates are not sustainable long term and have lead to a tremendous asset bubble we're still just figuring out the consequences of. My house is still likely to go for more than I paid for it in 2018, even after adjusting for inflation. It should be obvious that housing cannot sustainably rise at above-inflation rates indefinitely.

state_less 3y ago

I’m not sure why people think interest rates will go down if we’re running 3%+ (50%+ above target) inflation and unemployment is below 5%. I don’t care what the projections are, the rates won’t drop until inflation is below 3% or unemployment shoots up. If they did drop the rates in these conditions, it would signal a failure of the FEDs dual mandate. My prediction is that rates stay the same or even are raised if inflation continues to run hot while unemployment is down.