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The Great Global Experiment On Free Money Is Drawing To A Close

A report from NBC News. “‘As we move through the year, we will see slower sales activity,’ said Lawrence Yun, chief economist at the National Association of Realtors. ‘Intense multiple-offer days are over… people can take their time. I think for the home sellers, they need to realize the days of double-digit price appreciation are over.’ If people are mulling a sale, he added, ‘They should do it based upon normal factors rather than trying to speculate on big price gains.'”

“‘I’m encouraged that we’re going to see many more new homes built in this year,’ said Robert Frick, corporate economist for Navy Federal Credit Union. ‘Some of the supply constraints are easing as far as materials go. The other thing which is important is that builders are buying a lot of land.'”

From DS News. “‘The early spring is poised to be the hottest housing market on record; we may start to see most homes going under contract within two weeks, but these conditions are likely to be short-lived,’ said Redfin Chief Economist Daryl Fairweather. ‘Now that the stock market is down about 10% from the start of the year and mortgage rates are up nearly half a point, the housing market could lose its luster soon. If that happens, I expect the inventory shortage to finally reach its nadir because overpriced homes will start to pile up on the market.'”

From Yahoo Finance. “Zelman & Associates Co-Founder and CEO Ivy Zelman joins Yahoo Finance Live to discuss the housing market. ‘The second homebuyer has also been a big part of this market in the last two years. And one would argue maybe the second homebuyer is a little stickier because they might be truly looking for a vacation home long-term. But do they start to get nervous if home prices are hitting a wall, they’ve made a ton of money, and they decide that they want to sell now and take their chips off the table because RESI is slowing? So I don’t know if that really answers your question, but I think it has been a disproportionate part of what has resulted in the surging home prices we’re seeing.'”

“‘There’s a massive backlog of both single family for sale, single family for rent, what we call bill for rent. And there’s a massive pipeline of multifamily that if that– all that product gets completed over the next year and a half, two years, we’re going to have oversupply causing pressure on home prices.'”

“‘I can tell you that if you need more space and your current situation, you’re paying in rent what would arguably be more than what your monthly payment would be if you were to buy today, then I think you have to make a transition. But if you’re not sort of in a have to move mode, then I wouldn’t because when you look at first-time buyers today, there’s going to be a ton of product available coming. And they call it the winter’s coming.'”

A press release. “More than one-third (34.1%) of U.S. single-family homes for sale in December were new construction, up from 25.4% a year earlier and the highest share on record, according to a new report from Redfin.”

The Atlantic. “Houses have been selling at higher prices, more quickly—and buyers haven’t been able to find much relief by broadening their search to other areas, because this is happening in much of the country. ‘This is one of the more universal periods of zaniness that we’ve seen,’ Issi Romem, the founder of the economic consultancy MetroSight, told me.”

“Some buyers have been willing to waive the contingencies on their offer, such as finalizing their purchase after a home inspection. Jenny Schuetz, a senior fellow at the Brookings Institution, advised against doing this, because it’s risky. ‘If everybody else is buying in a frenzy, that doesn’t mean you should buy in a frenzy too,’ she said. ‘Some of the people who win those bidding wars may not have made good decisions.'”

The Idaho Business Review. “Idaho Business Review chatted with Quinn Stufflebeam about what First American Title Company and TFC are looking like today and what the future holds for the residential real estate market. ‘People look at what they can afford for their monthly payment, which goes toward interest payments and principal, as well as the purchase price. But if the interest component starts to go up, that means something has to go down. And that’s usually the purchase price. So, we’ll see a slowdown in the market, I think. To what extent I don’t know. Hopefully, it doesn’t look like 2008, when the brakes came on and property value started to decline.'”

From 48 Hills in California. “More than 40,000 housing units—ten percent of the current housing stock—are currently vacant in San Francisco, a new report shows. The data in the report, by the Board of Supervisors Budget and Legislative Analyst, strongly suggests that a significant percentage of new market-rate housing that’s been built in the city in the past ten years is still empty, and thus doing nothing to alleviate the housing crisis. Some of the vacant units—7,241—are empty because they’re currently on the rental market. Another 2,400 are rented but the renter hasn’t moved in yet.”

“But 8,039 units have been sold to new owners who have not occupied the property, and 8,565 units have owners who use them for short-term seasonal or recreational purposes—that is, they come to the city every once in a while, and the rest of the time the place is empty. So that’s more than 16,000 units that aren’t available for full-time residents. One of the more dramatic elements of the report: In 2010, only 794 units were sold but unoccupied. In 2015, that number was 1547.”

The Globe and Mail. “The Bank of Canada’s maiden voyage into quantitative easing is coming to an end. Now we’re about to find out what the return trip – quantitative tightening – looks like. The implication is that one of the boldest policy actions the Bank of Canada has ever taken could soon go into reverse – possibly at about the same time as interest rates start to climb out of their deepest valley on record.”

“The Bank of Canada had never done a quantitative easing, or QE, program before, and it has never tried to exit one before. So, it’s hard to say just how big a deal that will be. We’re about to find out – if not in March, certainly in the following few months. It has decades of experience with how rate hikes work their way through the economy and the financial system, but no experience with unwinding a QE program.”

From ABC News. “They say talk is cheap, although for the past few years, it hasn’t been quite as cheap as cash. For months now, the world’s money mandarins have been sounding the alarm that the great global experiment on free money is drawing to a close. And in recent weeks, their cries have become more shrill. Interest rates will be rising sooner, faster and to higher levels than previously expected. The turnaround started just on a year ago. It was just that central banks wouldn’t believe it and did their best to ignore it, loudly proclaiming that interest rates would not be lifted for years.”

“Unfortunately, the interest rate horse already has bolted and the official rate rises that are about to begin merely are playing catch-up. It’s an easy mistake to make; to believe central banks are all-powerful and dictate the direction and size of interest rate movements. And for most of the past half-century, they did. But they lost control a year ago, and while they remain a powerful force in the marketplace, they are far from omnipotent.”

“It’s been the same story across the globe. In Germany, until last week, government bond rates for years have been below zero. That’s just ludicrous, conflicting with 5,000 years of human history and any sense of logic. It’s also dangerous. Ultra-low, zero and negative interest rates have distorted global finance, pushed investors into ridiculously risky investments and artificially inflated stock prices and real estate. They’ve also punished savers, anyone who wanted to park money with minimal risk.”

“Much of it is to do with China. The Middle Kingdom’s rise to power came about from its industrialisation. It rapidly shifted from a rural-based economy to an export-based factory powerhouse. Whole industries pulled stumps and shifted to China. Essentially, its biggest global export was lower prices. That had another effect. As workers across the developed world lost their jobs, unemployment rose, union power was crushed and wages stagnated. Add in the rise of the internet and the digital economy, and even skilled workers could be sourced offshore and online, further depressing developed world wages.”

“That allowed central banks, which took over running the global economy in the 1980s, to continue cutting rates, especially during a crisis. There was the Asian financial crisis of 1997, the Dotcom bust of 2001 and the global financial crisis of 2008. Until finally, they ran out of ammunition with interest rates at zero. Those trends largely have run their course.”

“If ultra-cheap cash created all these asset bubbles — soaring house prices and stock markets at nosebleed levels — then, surely, logic would dictate that higher cost cash will burst them and we’ll all be ruined. That’s a distinct possibility. But it’s more remote than many would have you believe. Unwinding the distortions created by free money won’t be easy, nor will it be quick. And it won’t come without pain or casualties. But it is entirely necessary.”

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This Post Has 109 Comments

  1. When the cheerleaders are on the bus, the game is over.

    ‘central banks, which took over running the global economy in the 1980s’

    Any one remember voting for that? Neither do I.

    1. ‘central banks, which took over running the global economy in the 1980s’

      ‘Any one remember voting for that? Neither do I.‘

      – The Fed is, after The Deep State (I.e. unelected bureaucrats) or the 4th branch of government, the fifth branch of government, with these two rapidly replacing the original three. Congress is useless; too busy trading stonks for self-enrichment. Joe Bite-Me of the executive branch (aka the Manchurian candidate) stole the 2020 election (with a lot of help, since he’s senile and/or otherwise challenged). SCOTUS is holding its own for now, thanks to DJT appointments.

      – The Fed is unelected and unaccountable. They enable the financing of the “Progressive” takeover of America. See The Ten Planks of The Communist Manifesto.

      – The Fed and other Central Banks have directly caused three giant asset bubbles in 20-odd years. We’re experiencing #3 now; “The Everything Bubble.”

      – Any centrally-planned, command-and-control economic system is doomed to fail, but too few opportunities for graft, power and corruption.

      – Insert “This is fine” meme here.

      – Living the dream.

      1. The Fed is, after The Deep State (I.e. unelected bureaucrats) or the 4th branch of government, the fifth branch of government

        I suspect they’re one and the same.

      2. The Fed governors are nominated by the elected President and confirmed by the elected Senate, so at least there’s some voter control. Indeed I believe that if there weren’t 50 Republicans in the Senate, the fed chair would have been libby Lael “Modern Monetary Theory” Brainard.

        1. “Modern Monetary Theory”

          Is this a real theory, or just something made up to support Democratic economic policy?

          I took a LOT of college- and graduate-level economics classes in the recent past to have never encountered that term.

          1. Sounds like a load of caca. Works great up until the day when the currency blows up on the international money market in paroxysms of inflation-driven devaluation.

            “The whole idea of MMT is that since a sovereign entity can borrow in its own currency, it can print more money when it needs to pay off all its debt. The central bank just needs to keep interest rates low,”

            https://www.businessinsider.com/modern-monetary-theory

          4. Is this a real theory, or just something made up to support Democratic economic policy?

            I read a bit about this. MMT has two key points, the second is the showstopper:

            1) Funding the government through seigniorage.
            2) Taxes are used for the sole purpose of braking the economy, as they are no longer necessary to fund the government.

            Item 2 is where theory meets reality, and fails. The US was founded, in part, due to a tax revolt. Wealthy and powerful people fight tooth and nail against taxes then and now. The thought you can quickly and precisely increase taxes in a democracy is false. I doubt even Putin or Xi could do it even with the amount of control they have.

        2. MMT would bring down the country quickly. Look at how fast this latest money printing has absolutely destroyed prices.

    1. How are a handful of tow trucks supposed to “remove” 50,000 trucks? And what’s to keep the trucks from simply returning?

      But as the quislings are learning, no one actually supports their globalist azzes.

      And this is a a tipping point, if Trudeau and his globalists lose this battle, other similar protests will pop up everywhere. The globalist media in many countries is trying to memory hole this.

      1. People talking about a big convoy of trucks going to start up in US with destination Washington DC.
        They don’t want to televise the Revolution.

          1. DC is surrounded by dense suburbs for a radius of 15 miles, at least, in every direction. The roads are already full of cars, and that’s even with people still w@h. 50,000 trucks just aren’t going to fit.

        3. “They don’t want to televise the Revolution.”

          I didn’t see this story in our news broadcast, so the MSM is trying make it go away.

    1. Haha, me too. By the time I get around to it, my call may interrupt a realtor or seller choking on self-induced carbon monoxide fumes in a closed garage.

      All I wanted was a fair price. You make me wait this long, fine. I’ll wait long enough for an unfair price.

      1. Unfortunately you’ll be waiting forever. Investors will gobble houses up and rent them out. They were slow to do so in 2009, but now they’re posed to pounce, especially since they can trade in rental-backed securities. I remember HBB talking about rental companies predicting profits based on 5% rent increases/year.

        1. I remember HBB talking about rental companies predicting profits based on 5% rent increases/year.

          IIRC, that was/is a 5% cap rate.

        3. Everyone who buys presently will lose alot of money. Take a hint from Zillow’s recent swan song and stand back and stand by while knifecatchers impale themselves.

        4. Oxide? I thought you were Bromide(*), Realtor Bromide.

          (*)a trite and unoriginal idea or remark, typically intended to soothe or placate.
          “feel-good bromides create the illusion of problem solving”

          2. Periodic table says that oxybromide doesn’t exist, not in any stable state.
            No, I’m not a realtor. HBB just calls me that because they don’t like me. I’m a fedgov.

        5. Not if housing prices start to go down.
          It’s one thing to be renting a house out for 50% of your carrying costs when its value is going up.
          It’s totally different when the house’s value is going down.

          BTW, SFH rental prices are already going down in the SF East Bay.

  5. ‘More than 40,000 housing units—ten percent of the current housing stock—are currently vacant in San Francisco…One of the more dramatic elements of the report: In 2010, only 794 units were sold but unoccupied. In 2015, that number was 1547’

    All these years, the shortage was a lie.

    1. “All these years, the shortage was a lie.”

      It’s rather impossible to hide 25 million excess, empty houses. Nevertheless, the culled a whole bunch of suckers in those years.

      Now there’s nothin left but the cryin.

      Annandale, VA Housing Prices Crater 22% YOY As Northern Virginia Housing Prices Tank On Shrinking Population

      https://www.movoto.com/annandale-va/market-trends/

  9. ** “Idaho Business Review chatted with Quinn Stufflebeam . . “

    “Quinn Stufflebeam”. hmm now that’s an unusual last name.
    wonder if Quinn knows Bryce Shivers and Lisa Eversman? maybe Nina & Lance?

        1. It looks like 15-64yo have left the market.

          ^^This. If we ever get true price discovery, there could be $50,000 houses for years.

    2. YoY change, 15-64yr/olds. Is that a change in population? Because that doesn’t look good from a societal perspective. Is that a change in buyers? Because that doesn’t look good from a real estate perspective. Without more context, I’m not sure what I’m looking at.

  11. I thought maybe I should give some housing advise………after all my name is Housing Wizard.

    Ok, here it comes,

    DON’T BUY!

    1. I saw 2 people wearing gloves and masks yesterday while at the Target shopping center in Mira Mesa yesterday.

      1. target: haha that’s “Karen Central” here in citrus heights, ca. about . . .75% masked-up inside. and in the parking lot. which always makes me laugh.so.hard.

        so far the few times I’ve had to go inside target (sans mask) for something, during the past 2 years, I’ve received looks, stares & glares from a variety of people. usually the mean middle-aged menopausal matrons glare. so far, so good but hey, Eff ’em and if they EVER say a peep i figured I’d drop to my knees & sky scream ” Nooo NOOOOOOOOO” like the green beanie bonkers female!
        now THAT would be a hellova youtube moment. haha!!

          4. I once worked at a now defunct tape drive company (Cipher Data Products) in nearby Scripps Ranch, just on the other side of I-15.

            Manila Mesa. Gotta love it.

          5. I’ve basically lived in San Diego since 1989, including Carmel Valley, Encinitas, Kensington, Tierra Santa and Poway. My grandparents moved from Michigan to Chula Vista in 1951 then Escondido in the 1960s. I’ve got a pretty good grasp on the region.

    2. Commie Maryland and DC are clinging to their Omicrons more tightly than conservatives cling to their guns and religion. Omicron is going to do a Taylor and shake ’em off. Swiftly.

    3. “The yellow mattress crowd will be wearing masks while driving alone for the rest of their lives, because they have Mass Formation Psychosis.”

      I hear the clucking from them all the way out here in Boston.

      1. “The yellow mattress crowd will be wearing masks while driving alone for the rest of their lives,”

        For some of them that may not be too long.

        I saw some dope wearing a mask but no helmet while riding a motorcycle the other day. The way the snowbirds drive he’ll be lucky to make it to Easter Sunday.

        1. “I saw some dope wearing a mask but no helmet while riding a motorcycle the other day.”

          That’s priceless. You didn’t happen to be in New England or California at the time did you?

  13. Home Depot’s answer to the labor shortage: Next-day job offers

    So, they aren’t going to interview 100 people and after making everyone wait 3 weeks, make offers to the top 5 candidates?

    Instead, the hiring managers will ask themselves if the candidate can perform the menial retail job, and if the answer is yes, hire them on the spot … you know, the way it used to be.

  14. But we have a backlog that’s at 2007 highs in single family. If you go into the southwest, southeast portions of the mountain states, the pipeline is massive.
    In the article Zelman lists the Mountain states as having a particularly large pipeline of new homes.

  15. Just thinking, one of the mistakes of the 1% Globalists Monopoly take over of US and many other Countries is they have no charismatic and convincing leaders.
    They think that fraudulent censored news will carry the day.
    But , A bunch of old corrupt evil looking old people who can’t talk , like the Puppet Biden ,just doesn’t inspire, or Pelosi . Its hard to even get through 10 minutes of their dribble.
    Unfortunately, Hitler had the ability to whip up mass psychosis and hate with his bizarre speeches of Arian greatness, while scapegoating the Jews.
    So, Biden trying to say that over half the Country are White racist or Domestic terrorist just flops. Also the scapegoating of the unvaccinated is a narrative that is just starting to break down .
    Mandates that threaten jobs to all walks of Society is a attack on all walks of Society.
    Think Bill Gates , Klaus Schwab, and Soros, again seem like cartoon characters in which their self serving psychopathic natures are evident.
    So, I think in the final analysis people will start realizing that the New World Order of Dictorship and enslavement doesn’t offer them anything , and only wants to take from them .

    1. For instance ,the Truckers are inspiring in that they actually represent the productive population sector so attacked by the Globalist in everyway. .

    2. Bill Gates , Klaus Schwab, and Soros, again seem like cartoon characters

      I kind of envision them stroking a psychotic cat sitting on their laps. Except in their cases, they really are incarnations of Dr. Evil.

        1. it’s so windy here in N. Cal the trees are swaying & popping big time. plenty of trimming work rest of the week. roof shingles also.
          coulda’ swore I saw a tree branch fly by that looked like the ex was riding it. . .

          I gotta cut back on the cheap vodka & peyote.

        3. Gross. Fried in soy, tortured chickens, chemical batter. You could make that all at home with Amish chickens for the same price if not cheaper.

    1. In the post, she details watching her avatar get raped by a handful of male avatars, who took photos and sent her comments like “don’t pretend you didn’t love it.”

      Are we sure this wasn’t an anime video?

      1. I remember watching a bf play Diablo I on Battle.net, back in the mid -90s. He got pk’d very quickly. No charges were filed.

  18. Someone hacked my debit card last week and wiped out my checking account and the overdrafts maxed out my credit card. Guess what they were buying? To add insult to injury, it was bitcoin from some shady cryptoexchange.

    1. Someone hacked my debit card

      I never use my debit card for that reason. I have a credit card with a low credit limit which I use for mundane purchases and which I pay in full every month.

    2. “To add insult to injury, it was bitcoin from some shady cryptoexchange.”

      Probably someone who works at the cryptoexchange.

  19. Is it already too late for real estate investors to dump their HODLings?

    ‘I think for the home sellers, they need to realize the days of double-digit price appreciation are over.’

  20. Wow, 131 thousand strong Truckers in US are going to have a convoy from California to Washington DC to protest the mandates and loss of freedoms.

    In all the planning by the Globalist to take over, I doubt they perceived Truckers in big rigs leading the charge to stop the tyranny.

    Apparently the protest is totally legal according to the Truckers that have organized this rebellion.

    Hopefully this will inspire other bodies of workers to rebel against evil, such as Doctors and nurses at hospitals under threat of job loss if they don’t comply with lack of valid treatment, and blatant cover up of vaccine injury.
    This could be a good spark to knock people out of mass brainwashing and come to their senses .
    Seriously, the Globalist have to be stopped , the sooner the better by the people, for the people.

    1. COVID didn’t destroy the economy, government destroyed the economy. We’re taking our country back.

      1. Canadian Police are threatening to arrest Truckers now if they don’t move.
        Do you think Canada has that many jail cells. ?
        I heard one trucker talking about how he had a heart condition , so he didn’t want to take the jab. .
        They wouldn’t give him a exemption.

    1. Ah yes…good old fashioned fundamental transformation in action!

      “transformation through education”

  24. I just saw this: a reply to Justin Trudeau’s announcement that he has covid:

    Sometimes, having Covid makes you feel like you just got hit by a truck!

  25. Word is that Trudeau has been spotted in British Colombia, and that he doesn’t have Covid (big surprise).

  26. Not all central bankers are on board with the impression that 1970s style inflation is on the way back unless they apply the brakes.

    1. The Financial Times
      European Central Bank
      Christine Lagarde rejects calls for ECB to act faster on inflation
      Central bank president forecasts price growth pressures in eurozone will ease this year
      ECB president Christine Lagarde
      ECB president Christine Lagarde: ‘The cycle of economic recovery in the US is ahead of that in Europe’
      © Kai Pfaffenbach/Reuters
      Martin Arnold in Frankfurt January 20 2022

      Christine Lagarde has rejected calls for the European Central Bank to raise interest rates more quickly than planned in response to record inflation, saying it had “every reason not to act as quickly or as ruthlessly” as the US Federal Reserve.

      The ECB president warned that raising interest rates too soon risked “putting the brakes on growth” and she told France Inter radio on Thursday that she wanted its monetary policy to act as “a shock absorber” instead.

      Soaring energy and food prices lifted inflation in the eurozone to a record high of 5 per cent in December, well above the ECB’s 2 per cent target, prompting calls for a faster withdrawal of its generous stimulus policies.

      Lagarde, however, forecast that inflation in the bloc would stabilise and “gradually fall” over the course of this year, referring to the ECB’s forecasts in December when it said inflation would drop below its target by the end of 2022.

      “It will fall less than we all had all envisaged a year ago, including all the world’s economists, but it will fall,” she said.
      …

      1. Euro-denominated sovereign bonds are dropping in value at a 5 percent annual rate, even before considering the deliterious effect of rate increases. Quick, you better dump them for some risk asset investments before you lose half the value of your HODLings to inflation over twelve years or less!

      2. Watch the wheels fall off the MMT bus…

        “Soaring energy and food prices lifted inflation in the eurozone to a record high of 5 per cent in December, well above the ECB’s 2 per cent target, prompting calls for a faster withdrawal of its generous stimulus policies.”

      1. The Financial Times
        Eurozone inflation
        Eurozone inflation hits record 5.1%
        January figures defy expectations of slowing consumer price growth and increase pressure on ECB
        Compared with the previous month, consumer prices rose 0.3%
        © Reuters
        Martin Arnold in Frankfurt
        31 minutes ago

        Consumer prices in the eurozone rose by a record 5.1 per cent in January from a year earlier, keeping inflation higher than expected and increasing the pressure on the European Central Bank to respond with tighter monetary policy.

        Steeper increases in the price of energy and food from a year ago were only partly offset by slower growth in prices of manufactured goods, which meant inflation rose from its previous eurozone record of 5 per cent in December.

        That clashed with widespread expectations for eurozone inflation to fall at the start of this year. Economists polled by Reuters had on average forecast eurozone inflation rate of 4.4 per cent in January.

        Compared with the previous month, consumer prices rose 0.3 per cent, indicating underlying inflationary pressures continue to build in the 19 countries that share the single currency.
        …

  27. It seems like the policy regime of central banks buying bonds to suppress yields below market rates, in order to encourage risk asset investment, is ending.

    What will replace it should be quite interesting!

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