Good Morning SKI,
Totally agree.
A couple of thoughts.
Our first home purchase was in 1978. We both had good jobs and made fair money. We saved a $35,000 down payment on a $135,000 new home in Bartlett IL.(a new growing suburb far out from of Chicago).
Back then inflation was raging 11% to 14% and one could not save fast enough. Debt was your friend then, as inflation reduced the value of the debt. We both had COLA (cost of living allowance) quarterly from GM back then ( helped us save).
1978 to 1981 featured oil going from $10 to $40.00 a barrel and it was hard on big car makers. The Japanese cars had small fuel efficient cars and they took huge market share from US automakers. It created the term "Rust Belt" for an economic description the Midwest (US automakers were going broke, Chrysler had its first bailout).
I received a promotion but traveled the country for 30 months and subsequently was transferred to Houston on September of 1981 (with another nice promotion).
Selling my house in Chicago was a disaster. GM bought it from us and we got $5,000 of our $35000 down payment back (lost 30,000). We were told we paid too much for it in 1978. With our first home wiping out our down payment, we moved to Houston and had to rent a house for several years. I sold my paid for new 1980 Corvette for $12,000 and we began accumulating a new down payment.
Houston was a bastion of economic activity. Being the home of the oil patch, housing was still inflating, but Volckers 18% Fed Funds Rate was taking its toll on housing. In late 1983 we bought out second home with a 13.3% 30 year mortgage. Like you, we refinanced it for 15 years and at much lower rates as time went on. In 10 years we paid it off after some stock gains.
Having debt, and taking the promotions that came with "My GM Career" left bad scars in my home buying: "The American Dream coming true" experience.
When GM called and gave me another promotion, it was back to Detroit in 1987, (the oil patch had fallen apart by then with cheap oil,caused by a nation wide recession). I had saved and paid down on my Houston house. I passed on the promotion as it would cause another loss in home selling, and was given a 10 day suspension from GM "to think about my career". I did think about it those 10 days, and in between those 10 days three very good Chevrolet dealers called me and wanted me to work for them.
I called Chevrolet HR Central Office and asked them to process my termination papers after the 10 days of no pay were over. It was traumatic, but it was where my heart really was. I loved the product, not the very political bureaucracy of GM.
From a fast track, hi potential young employee grad of GMI with honors, I left the fur lined rut of a big corporation and went to work for a man who needed some youth in his operation. Best thing I ever decided to do.
Having debt burned into my mind as being traumatically bad, and never really being able to say "I'm in control of my destiny"were two major lessons I learned before I was 30. They have lasted forever since.
I have serious fears that our sovereign debt will have similar consequences for us all.
When we pay more in debt servicing than our defense budget, bad players out there will join forces and view us as weak. Couple that with a rot from within that stops us from harvesting our natural resources and the associated wealth derived from that and it is a matter of letting the debt compounding get out of control, we are well on our way.
In my usual non paranoid view - it scares the dickens out of me, that the New Green Deal, is a fast track to never harvesting our huge fossil fuel resources while all of our adversaries opportunistically ride the wealth train of the OPEC Cartel doing just that - reaping the huge wealth of harvesting fossil fuels.
It is an unholy plan to destroy our powerful force in the World.
The ZIRP has resulted in a historical malinvestment into green energy which is not reliable, nor is it environmentally beneficial. It is a grand scam to make our energy expensive and thus make our manufacturing noncompetitive. Somewhere in there our defense industry has to have a competitive core of capabilities within our homeland.
Low interest rates not only pull demand from the future, but when aimed at low intermittent production of energy which makes all manufacturing noncompetitive, we simply lose the ability to be strong geopolitically.
Germany is the poster child of this along with Europe in general.
The desire for Norway and Sweden to join NATO speaks volumes I think.
The current surprise that our economy is doing so well, should not be a surprise.
The current interest rates are supportive of growth. IF/when interest rates get to the point of stifling growth, the young of today will have some harsh lessons much like our generation's experience. It's NOT FUN!
I'm very sure the BOOHOOING of GEN Y, who like $9.00 lattes and experiences vs. assets and saving for them will result in a lot very rude awakenings.
We all get to learn much over the long course of a healthy life.
I'm all for today's rates staying where they are.
They reward savers.
They allow pensions to safely invest and provide what they committed to for their investors.
I have half a hunch that rates will/may go up from here.
Watch oil and commodities.
Watch unions demand and rightfully get huge pay raises.
Our disinflation is far from assured. I'm of the opinion it is be short lived.
When a government spends so recklessly without concern for unintended consequences (inflation), they risk losing the value of our currency and everything that it buys.
A turn around from nefarious self destruction of wealth, power, manufacturing capability, and military strength, will require some hardships most won't enjoy.
We need to market our resources to the emerging countries that crave what we take for granted - it's a great market need.
The profit from resource harvesting that will occur with or without our environmentally safer methods, needs to pour into innovation and efficient solutions of electricity generation for both the developed and emerging markets.
Nuclear, hydrogen fuel cells, all need to be designed and exported to the world because they are reliable and more efficient,than green new deal projects that are floundering just because the cost of capital has gone up to normalized historical rates.
We have pissed away a lot of mal-invested capital - when it was cheap. The unintended consequences of a non-compatible grid that does not support the direction of the IRA (really called the New Green Deal 2.0) is a waste that will require being paid back at much higher interest rates!
Thus again the cutting edge of debt pops up its ugly head.
If it does not result in a better way, with a higher return on the money loaned, it costs even more to service.
An excellent way to assure our quality of life is in decline.
I'm not sure we have the time to get smart and become disciplined in free market forces vs. big government and the lure of politicians mandating all the calls because it pays for their re-election campaign funds.
The good news is the dogs are not eating the dog food.
EV's have their place as delivery vehicles on daily routes and as urban commuters.
The mandate for EV's to be universal along with renewable sources of energy to displace all past reliable sources, is an overreach of government power and I'm hoping the reward for such mandates results in a smarter Congress that allows for individual personal freedom to choose and free market forces to determine where the future takes us.
It's bit of a bleak Saturday morning note, but the pendulum does reverse, and for a split second, it actually stops.
Let us hope we recognise that split second, and know we are on a corrective course.
It can be powerfully strong to know we go in the correct direction.
I feel that need NOW!
Sorry for the rant, but your concise posts get me thinking of a positive change that I hope we begin.
It is OK to learn from father time and past experiences!
warmest regards,
Bob |
