{"id":53942,"date":"2015-06-24T05:00:01","date_gmt":"2015-06-24T10:00:01","guid":{"rendered":"http:\/\/www.shotinthedark.info\/wp\/?p=53942"},"modified":"2015-06-23T08:20:55","modified_gmt":"2015-06-23T13:20:55","slug":"options-2","status":"publish","type":"post","link":"http:\/\/www.shotinthedark.info\/wp\/?p=53942","title":{"rendered":"Options"},"content":{"rendered":"

Joe Doakes from Como Park emails:<\/p>\n

Boris Yeltsin*, head of the Federal Reserve, declares the short-term interest rate the Fed charges banks will remain nearly zero<\/a>.\u00a0 That will keep loan interest rates down hoping to stimulate the economy.\u00a0 And with interest rates low, buyers can afford a larger loan so sellers can afford to retire to Fort Meyers.\u00a0 Unalloyed good, right?<\/p>\n

Maybe not.\u00a0 When I bought my first house in 1987, our loan was 9.5% because the seller paid two points to buy down the rate.\u00a0 My wife and I were dancing in the street \u2013 Free Money!\u00a0 On a $70,000 house, our PITI was about $1,000 per month.\u00a0 We could afford that as we were both working full time.<\/p>\n

That same house today would cost $150,000.\u00a0 At 4%, the payment is still around $1,000 per month.\u00a0 But can Millennials afford to pay that?\u00a0 They have more student loans than we did.\u00a0 Their debt to income ratio is worse.\u00a0 Are they getting married as my generation did, working full time as we did, giving up vacations and iPhones and luxuries as we did?\u00a0 If not \u2013 how can sellers afford to sell and move?<\/p>\n

I don\u2019t have a solution, I merely note that zero interest rate is not a silver bullet to cure all economic ills.\u00a0 And once you\u2019ve fired it \u2013 as the Fed has done \u2013 there\u2019s nothing left to try.\u00a0 After that, we\u2019re down to the Iceland Option<\/a>.<\/p>\n

*Oops, I misspoke \u2013 Janet Yellen is head of the fed.\u00a0 Boris Yeltsin was the dictator whose policies led to economic collapse.\u00a0 I get confused.<\/p>\n

Joe Doakes<\/p><\/blockquote>\n

Something liberals, with their decades of tinkering with the buttons and levers and switches of government, never quite understand; the intrinsic value of things never really changes (allowing for variables like location, quality, or whatever applies). \u00a0A house is a house. \u00a0An appendectomy is an appendectomy. \u00a0A flipped patty is a flipped patty.<\/p>\n

Tinkering with the money supply only changes the value of the things we use to represent those concrete values. \u00a0Making more money only works if you make more stuff for that money to represent.<\/p>\n

We’re not doing nearly enough of that.<\/p>\n","protected":false},"excerpt":{"rendered":"

Joe Doakes from Como Park emails: Boris Yeltsin*, head of the Federal Reserve, declares the short-term interest rate the Fed charges banks will remain nearly zero.\u00a0 That will keep loan interest rates down hoping to stimulate the economy.\u00a0 And with interest rates low, buyers can afford a larger loan so sellers can afford to retire […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[57],"tags":[],"class_list":["post-53942","post","type-post","status-publish","format-standard","hentry","category-economy-and-the-market"],"_links":{"self":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts\/53942","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=53942"}],"version-history":[{"count":1,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts\/53942\/revisions"}],"predecessor-version":[{"id":53943,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts\/53942\/revisions\/53943"}],"wp:attachment":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=53942"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=53942"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=53942"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}