Volcker, from Jim Sogi

September 16, 2015 |

 I remember the 80s real estate boom. There were systems for buying no money down. Flipping real estate. There were 10% months. People leveraged investments. People bought with balloon payments. Then Volcker started tightening. Imagine having Treasuries at 14%. Lots and lots of people went bust, got caught. Lots of foreclosures. No more financing. No one could refinance at 17-24%. The long term average interest over the millennia is something like 4-6%. The cycles are very long. The Fed tightening cycles continue for quite while.

Paul Marino writes: 

This was from March but has stuck with me since and sort of guides my thoughts on rates. Basically, Bernanke doesn't expect the Fed Funds rate to rise back to its historical average of 4% in his lifetime. That is a long time at low rates and basically non-existent inflation for that to occur.

"At big-ticket dinners, a blunt Bernanke sounds theme of low rates"


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