We’re in a massive deflationary cycle right now. $30T lost in the markets, $3T lost in housing equity, $50T or more in CDS,etc…. I count credit as part of the money supply. So we’ve lost a huge amount of it in the last year. Look around. Commodities down about 75% accross the board. Homes around the country are about 25% down. Prices are coming down on just about everything. People are losing jobs. All this means less US$ running around.The US$ gaining strength. It’s in higher demand. Banks make loans. It’s a big part of their business structure. The demand for mortgages should be declining. Rates tend to go up in a growth cycle and down in a bust.There’s far less demand for debt as economies contract. The spread is very large right now. But as the banks see that getting return will be more difficult, they will have to lower rates. And inflation wont be the big concern any longer. Risk needs to be mitigated since defaults are now the big concern. But this can be done with higher down payments and more careful documentation work.
ECRI is a respected think tank of economic analysis. They track cost and growth. Look them up. Very conservative organization. They are about to call deflation. About 3 months late in my estimation, but they are extremely careful about this sort of thing as they have a big reputation to protect.
what do I know. I just report what I’m seeing.
