In the rest of 2022, we pay the price for all that newly created money. The most obvious price we're all paying is rising prices, inflation. All that new money created this inflation. It wasn't Trump or Biden, it was The Fed who created it. The stock market is plummeting again today, in a much needed crash from ludicrous stock values. Inflation is still rising, according to last Friday's numbers. Inflation is still getting higher, officially 8.6% a year now, though gas prices, real estate prices, and many food prices have risen much more than that. Prices on food and many consumer items will keep increasing this year, generally speaking. Gas prices should back off a bit by mid to late summer, but stay ridiculous, much higher and they were a year ago. The real estate market is turning, but it turns slow, like a huge ship. Prices for homes, in most places, should be falling by fall or winter 2022. This may not be a total collapse in most places, but a decent correction in prices, at least. Millennials are about to learn how stupid real estate FOMO can be. There will be a lot of homeowners underwater on their mortgages a year from now. Not near as many as in 2008-2009, but quite a few.
Interest rates will keep rising for a few months. The Fed has started raising interest rates, to try and calm down inflation, which it let get completely out of control. The 10 year U.S. T-bill is a good gauge of interest rates. It was 1.66% at the beginning of 2022, and is 3.15% today. More important to working people, the 30 year fixed mortgage rate national average was 3.56% in January, and is about 6.10% today. The last time 30 year fixed mortgage rates were this high was around Thanksgiving time, 2008, 13 1/2 years ago. And The Fed will raise interest rates at least 1/2% this week, and will keep raising them in coming months. What this means is that you can afford less house right now, and a lot less by the end of 2022, as rates go higher.
By the end of 2022, 30 year fixed interest rates will be 6 1/2% to 8%, at least, and 9% to 10% would not surprise me. I'm fucking serious. Simply put, it is going to get a lot harder to get loans, and you will pay a lot more interest if you do qualify for one. The Fed will have to do another bail out next year, at some point, and lower rates a little, but mortgage rates won't get back down to where they were last year.
The Spring of 2020 was actually an acute, deep but quick, financial depression. What we're headed into right now is more like 2008 in the Great Recession, and the long stagnant double dip recession of the early 1990's, put together. Debt is going to be the killer for most people, businesses, and governments. Most people who are actually paying their student loans now, will stop paying them, out of necessity. That will be a hit to colleges and universities' bottom lines. More important, mortgage, consumer, and auto loan debt will get harder to pay, especially for people who get laid off from their jobs.
For people who own rental real estate though, where your renters pay off the mortgage, debt will be awesome, as long as you have solid renters. High inflation means your renters are paying down the rental property mortgages in dollars that are worth less every month. This will be a great period for savvy real estate investors with solid renters. Of course, eventually, real estate prices will rise again, though it may be years down the line.
The layoffs have already started, and we'll see a lot more of those coming, as well. Like I said, this is the 2nd recessionary wave of the 2020's, and it will be a long, slow sticky one. From my point of view, as a geek on futurist thinking and economics, this is what I like to do. Not give people bad news, but give all of you a heads up on what's coming, so you can make better decisions for your own life.
If you want to listen to the blues after reading this, may I suggest this video of Popa Chubby, live at Daryl's House. This is what I was listening to while writing this blog post. Epic blues show.
If you don't think a homeless guy can shed any light on the economy, here are a few of my other blog posts from the past couple of years.
"Update: July 16th 2021," July 16th, 2021.
"Predictions: As we head blindly into 2020," January 26, 2020
"The economic collapse of our lifetimes will happen this month.. it's phoenix time," Oct. 1, 2019
"A beginner's guide to the next great recession," - August 9, 2019
Remember: Recessions and depressions are when the whole world goes on sale, and almost nobody wants to buy
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