The idea of the money supply and how its controlled and the players involved never really made sense to me. I hope there is someone who could actually add up where all the money came from and where it went.
This is the one thing I remember from macroeconomics class- lowering interest rates is printing money and raising interest rates is burning money. Printing money and burning money are old timey ways of controlling the money supply. Ultimately, there are a certain number of dollar bills circulating, and a subjective value the money represents, and the central bank can jigger with the value of a dollar by printing or burning dollar bills to control the amount in circulation.
The interest rate is a lever that the government and banks and the Federal Reserve has to control inflation and be ready to give the economy a break in the event of a serious need. I’ve always suspected Uncle Sam might print a few bucks for itself, but who knows. Printing money for the government budget might even be more fair than collecting taxes. The congressional budget meetings and debt ceiling talks are all related to where we max on government spending, which is only part of the equation. I am 100%, all the way, bet my life bullish on the long term health and prosperity of the United States. I wish the public schools were more like they were a generation ago, and that the government could get its spending and credit score in order. I want the same for myself; to have better understanding and to get my finances more stable.
For investors, higher interest rates mean higher mortgage payments for any purchase, refi, or rate reset scenario. Commercial sale prices and even some multifamily values have dampened, but the 1-4 unit residential values are mostly holding up so far. Residential values are being supported by a housing shortage, homeowners with low existing mortgage rates not selling, homebuyers taking on fixer uppers, inflation/rent/replacement cost, and investor activity. We are hearing a lot of investors say they can’t find good deals to buy.
Check your assumptions against the latest rates and parameters for debt financing. We can help!
