> a boon for borrowers
No, it's a boon for owners.
No, it's a boon for owners.
The demographic pyramid is inverting, interest rates have been falling but are now hitting 0, and the asset-owning bloc is falling below 50% of the electorate. Any one of these could stop the music, but all three are happening.
"You're lucky to get a home with a loan at a near-zero interest rate! We're such nice people. Uh oh, looks like your bank account just became worthless and your employer won't adjust wages to match inflation. And homes are even more expensive now! That's fuuuun."
The banks will get their wealth from somewhere, and the elites have proven that taxing by-proxy is much easier than traditional taxation and charging interest. If interest rates are low and the official tax rates don't go up too much, more wealth can be extracted and no one will be the wiser.
Besides, having everything on loan isn't really a sign of a successful system, depending on one's political-economic perspective. If everything is on loan, nobody really owns anything. You might be able to keep physical things on loan even if you fail to pay, but you will end up paying somehow. If his is one of the final steps in getting enough people to "buy" homes, that means we are close to a real estate collapse. It's serfdom all over again but with the illusion of ownership. (of course with property taxes for individuals we already have serfdom in that sense)
It's hard to see any of those collapsing in the near term. Especially (2).
Japan's interest rate has not exceeded 0.5% for the last 25 years:
https://tradingeconomics.com/japan/interest-rate
Ours hasn't been in a "normal" range for almost 15 years. At what point are low interest rates just the backdrop of our time here rather than something we should expect to change? Would we assign a higher probability of (say) the USSR reconstituting or the Euro becoming the global reserve currency or US interest rates going back to a more normal rate like 6%? If all are improbable, why assert that one must happen at some point?
"Things that obviously can't go on forever; will go on for far longer than you would believe...but when they stop, they also stop faster than you'd think."
Also:
"The market can remain irrational far longer than you can remain solvent".
At least in the US, mortgage debt only recently hit 2008 levels in absolute terms (i.e. not adjusting for 12 years of population growth), which doesn't seem overly burdensome.
But I would gladly have my mind changed.
For example, we prop up our residential housing market by having one part of the government create dollars to buy the mortgages backed securities created by another part of the government in order to keep the yields down and justify low mortgage interest rates.
Do you think the rest of the world is going to sit back and be cynically exploited forever?
Yes absolutely. Because this system does not benefits american citizens (it used to, but it is less and less the case). It benefits world elites which have been co-opted in a global financial system which is based on the dollar. Hell, the CCP leaders all own assets in dollars, they wouldn't want to see any of this change. Remember that the money that fuel the 2008 bubble was, for the most part, chinese investments.
Bottom line is, the world is driven not by ideologies or political interests but by economic interests. At the top: greed and at the bottom: hunger, with a declination in between. Both ends tend toward the status quo and the dollar is very much part of it. For me, only ecological collapse or some other unforeseen global cataclysm would change any of that and probably not for the best.
Ordinary American homeowners have massively benefited from rising home prices. They’ve spent that money on vacations, cars, drugs, etc.
Russia, the EU and China are fairly aggressively de-dollarizing, and encouraging trading partners to do the same.[1][2] See CMIM for example in the Asia region, INSTEX in the EU to get around Iran sanctions and the creation of the "Petroyuan". Lyn Alden has a great overview.[4]
[1]https://www.everycrsreport.com/files/2021-07-23_IF11885_09a6...
[2]https://www.csis.org/blogs/new-perspectives-asia/chiang-mai-...
[3]https://infobrics.org/post/32689/
[4]https://www.lynalden.com/fraying-petrodollar-system/#fraying
Literally the banks couldn’t afford to foreclose on the homes secured by toxic loan and tax payer funds went to foreclosing on tax payers.
If the banks were in trouble again, government would bail them out again with tax payer money to the detriment of tax payers. Just like the government did last time they would sweep people under the rug by removing them from unemployment numbers and pretending they never existed.
If prices look like they are about to stall keep an eye out for the introduction of the low rate 50 year fixed rate mortgage. Whatever it takes to keep incumbent homeowners receiving endless windfalls.
https://en.wikipedia.org/wiki/Public%E2%80%93Private_Investm...
Broadly we call this entire period quantitative easing.....