Posts Tagged ‘economy’

Markets: We’re down 12bps (.12%) on the day on the FNMA 4.5% bond, which is the benchmark for interest rates at the moment.  That’s down about 100bps (1%) from its high of last Thursday.  It is, however, a good bit higher than it was earlier today, so we’re seeing a sort of rally into the FOMC minutes that will be released at 2pm EDT.  The Dow is threatening 10,000 again.  This is translating to rates at 5%, plus or minus a fraction.

Analysis: This is not going to be easy to say, and will likely not make me popular.  Nevertheless, it has to be said, I think.  We’re in trouble.  This economy is in serious trouble.  Lasting, probably permanent, possibly fatal trouble.

The trouble is not coming from the usual sources.  It has very little to do with unemployment, or with productivity, or with declining innovation among US firms.  It has to do with the complete abandonment of fiscally-sound policy by the federal government, which is leading to the destruction of the dollar.

A friend of mine asked me the other day why, if the government is printing trillions of dollars to finance the national debt and keep the payrolls fat, we’re not seeing inflation.  I told him that we were.  It’s not showing up in the Consumer Price Index yet (though it eventually will), but that’s because the CPI measures only price increases.  There is another way for inflation to express itself, and that is in the decline of the value of the currency against international standards, like the price of gold or oil, or the value of other currencies, all of which are spiking.  There is no consumer pressure on prices because a) nobody is borrowing money to spend, because they can’t get loans b) nobody has any liquid savings, so no spending can come from reserves and c) banks are holding on to cash instead of lending it, because right now, who is a good credit risk?  Anyone?  Much better to fatten the balance sheet to prevent your institution from being taken over by the FDIC.

We got in debt as a people, then our government got into debt over what it could handle, now we’re trying to get out of debt by borrowing or printing money.  A child could see that this won’t work.  What is required is discipline and sacrifice.  Unfortunately, discipline and sacrifice are hallmarks of a bygone age.  Unless we recapture it, we’re in for a hard time.  This is only the front porch of the house of horrors, if we don’t shape up.

Advice: Don’t borrow money for anything that does not appreciate in value (education and land, pretty much).  Shed your debt as quickly as you can, including your home loan.  Learn valuable, off-grid skills like how to grow carrots and raise chickens.  And pray very hard.

Cj

Rate Watch by Chris Jones is broadcasted Monday through Friday via email. You can expect to read information on current rates and commentary by Chris Jones, Resident Magician and industry tracker. on what is happening in the industry and how it may affect you. It is a quick, easy, and accurate way to learn what the rates are in today’s market.

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Banks come, and banks go. The financial system appears to be in crisis, but that crisis is caused more by people losing their heads than by real danger to you and me. Stick together, people. Be good and even generous to one another. We’ll get through this thing all right, but we’ve got to stick together.

Meantime, if you want to know what’s happening, you can call us anytime. 801-787-2162 or 801-310-3407. Or stop by for a drink. We’re open. And we’re staying open.

Here’s the reminder quote of the day, as the captains of industry fight with the titans of Wall Street to see if you’ll be allowed to go buy a house one day:

George Bailey: “Just a minute – just a minute. Now, hold on, Mr. Potter. You’re right when you say my father was no businessman. I know that. Why he ever started this cheap, penny-ante Building and Loan, I’ll never know. But neither you nor anyone else can say anything against his character, because his whole life was – why, in the twenty-five years since he and Uncle Billy started this thing, he never once thought of himself. Isn’t that right, Uncle Billy? He didn’t save enough money to send Harry to school, let alone me. But he did help a few people get out of your slums, Mr. Potter, and what’s wrong with that? Why – here, you’re all businessmen here. Doesn’t it make them better citizens? Doesn’t it make them better customers? You – you said – what’d you say a minute ago? They had to wait and save their money before they even ought to think of a decent home. Wait? Wait for what? Until their children grow up and leave them? Until they’re so old and broken down that they… Do you know how long it takes a working man to save five thousand dollars? Just remember this, Mr. Potter, that this rabble you’re talking about… they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath? Anyway, my father didn’t think so. People were human beings to him. But to you, a warped, frustrated old man, they’re cattle. Well, in my book he died a much richer man than you’ll ever be.”

The Bailey Building and Loan is alive and well at 60 West Main Street in Lehi.