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Three Ways Fed Rate Hikes Will Impact Your Wallet

Three Ways Fed Rate Hikes Will Impact Your Wallet

Via SchiffGold.com,

The Federal Reserve recently delivered the largest interest rate hike…

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Three Ways Fed Rate Hikes Will Impact Your Wallet

Via SchiffGold.com,

The Federal Reserve recently delivered the largest interest rate hike since 1994 in an effort to combat inflation that turned out to be not so transitory.

Economists and policy wonks continue to debate the effectiveness of these rate hikes in the face of historically high inflation, but what do they mean for you? Should you care about rising interest rates?

Here are three ways Fed rate hikes will impact your wallet.

Your Credit Card Bill Will Go Up

When the Federal Reserve raises its rates, credit card interest rates rise right along with them. That’s not good news for American consumers who are turning to credit cards to make ends meet.

Revolving credit, primarily reflecting credit card debt, rose by $17.8 billion in April. That was up a sizzling 19.6%. This follows on the heels of a record 29% gain in March. Revolving debt now stands at $1.103 trillion, just slightly above the pre-pandemic record.

Average annual percentage rates (APR) currently stand at 16.8, with many companies already charging in the 20% range. Analysts say the average interest rate may well rise above 18% by the end of the year, breaking the record high of 17.87% set in April 2019. With every Federal Reserve interest rate increase, the cost of borrowing goes up, putting a further squeeze on American consumers.

According to one financial consultant, if you budgeted $397 a month to pay off $15,000 over 60 months on a credit card with a 19.9% APR, you would need to up your payments to $423 a month to clear the balance in the same amount of time.

Adding to the pain, credit card companies may up minimum payments as interest rates rise.

It Will Cost You More to Buy a House

Like credit card rates, mortgage rates will follow Fed interest rates higher.

Mortgage rates are extremely sensitive to Federal Reserve manipulation and we’ve already seen a hefty increase in the cost of borrowing to buy a house.

The average 30-year fixed mortgage rate has spiked to 6.1%. It’s the first time we’ve seen mortgage rates over 6% since the crash of 2008. Until mid-April mortgage rates were in the 4% to 5% range. Just one month ago, rates were 5.49%. At the peak of the pandemic, rates were in the 2.6% range.

We’re seeing the impact of rising mortgage rates on the housing market. Existing home sales tumbled to a two-year low in May.

Rising mortgage rates also close the door to a potential source of cash for American homeowners. Refinancing become a less viable option as borrowing costs rise.

Refinancing not only provides a lump sum of cash to spend but also lowers mortgage payments, taking some strain off the monthly budget.

There was a wave of refinancing in 2019 after the Fed’s monetary U-turn started pushing mortgage rates lower. But over the last several months, the refi market has collapsed.

Finally, as higher mortgage rates depress the housing market, home values will begin to fall. This unwinds the wealth effect of loose monetary policy.

And don’t think you’ll be unaffected if you rent. Rising home prices also drive rents higher. As the cost of buying a house rises, more people are priced out of the market. That increases the demand for rentals, driving up prices. On top of that, owners paying more for rental property will ultimately pass those costs on to their tenants.

The Recession Risk Will Rise  

The Federal Reserve created a massive economic bubble with its extraordinarily loose monetary policy. As it tries to tighten that policy, it will begin to pop those bubbles. That means the likelihood of a recession is on the rise.

In simple terms, this economy was built on easy money and debt. Taking away the easy money will pop the bubble and collapse the house of cards economy.

Nevertheless, after last week’s FOMC meeting, Federal Reserve Chairman Jerome Powell claimed that a “soft landing” was still possible. In other words, he thinks the central bank can slay red-hot inflation without tipping the economy into a recession.

Economist Daniel Lacalle said this is “impossible.”

After more than a decade of chained stimulus packages and extremely low rates, with trillions of dollars of monetary stimulus fueling elevated asset valuations and incentivizing an enormous leveraged bet on risk, the idea of a controlled explosion or a ‘soft landing” is impossible.”

In fact, the modest rate increases delivered by the Fed so far may have already tipped the US economy into a recession.

The Atlanta Fed has revised its Q2 GDP growth projection to — zero. That follows on the heels of a -1.5 GDP print in the first quarter. For the last several months, sanguine pundits pointed to “strong” retail sales as proof the consumer remained healthy. But retail sales unexpectedly tanked in MayConsumer sentiment is at historic lows. Stocks have plunged into a bear market.

Powell and other pundits point to a strong labor market as a sign the economy is strong enough to handle rate hikes. But employment is a lagging indicator and it is starting to look shaky as well. Hiring slowed in five out of eight sectors in May.

Federal Reserve monetary policy may seem wonkish and irrelevant to your daily life, but it impacts your wallet in many ways. You would be wise to prepare accordingly.

Tyler Durden Thu, 06/23/2022 - 15:00

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Government

New Hampshire Governor Vetoes Ivermectin Bill

New Hampshire Governor Vetoes Ivermectin Bill

Authored by Alice Giordano via The Epoch Times (emphasis ours),

New Hampshire’s Republican…

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New Hampshire Governor Vetoes Ivermectin Bill

Authored by Alice Giordano via The Epoch Times (emphasis ours),

New Hampshire’s Republican Gov. Chris Sununu vetoed a bill that would have made Ivermectin available without a prescription.

Ivermectin tablets packaged for human use. (Natasha Holt/The Epoch Times)

The Republican governor vetoed the bill on June 24, the same day that the U.S. Supreme Court overturned Roe v. Wade. Some fellow Republicans questioned the timing.

It certainly seemed like a convenient way to bury a veto of a bill that won support from the vast majority of Republicans in New Hampshire,” JR Hoell, co-founder of the conservative watchdog group RebuildNH, told The Epoch Times.

Hoell is a former four-term House Republican planning to seek re-election after a four-year hiatus from the the New Hampshire legislature.

Earlier this year, the New Hampshire Department of Children Youth and Family (DCYF) tried to take custody of Hoell’s 13-year old son after a nurse reported him for giving human-grade ivermectin to the teen months earlier.

Several states have introduced bills to make human-grade ivermectin available without a prescription at a brick and mortar store. Currently, it can be ordered online from another country. In April, Tennessee became the the first state to sign such a measure into law. New Hampshire lawmakers were first to introduce the idea.

Both chambers of the state’s Republican controlled legislature approved the bill.

In his statement explaining the veto, Sununu noted that there are only four other controlled medications available without a prescription in New Hampshire and that each were only made available after “rigorous reviews and vetting to ensure” before being dispensed.

“Patients should always consult their doctor before taking medications so that they are fully aware of treatment options and potential unintended consequences of taking a medication that may limit other treatment options in the future,” Sununu said in his statement.

Sununu’s statement is very similar to testimony given by Paula Minnehan, senior vice president of state government regulations for the New Hampshire Hospital Association, at hearings on the bill.

Minnehan too placed emphasis on the review that went into the four prescription medications the state made available under a standing order. They include naloxone, the generic name for Narcan, which is used to counter opioid overdoses, hormone replacement therapy drugs, and a prescription-version of the morning after pill.

It also includes a collection of smoking cessation therapy drugs like Chantix, which has been linked to suicide, depression, and other neuropsychiatric conditions. Last year, Pfizer, the leading maker of the FDA-approved drug, conducted a voluntarily recall of Chantix. Narcan has also been linked to deaths caused by severe withdrawals that have led to acute respiratory distress.

Rep. Melissa Blasek, a Republican co-sponsor of the New Hampshire ivermectin bill, told The Epoch Times, that one could veto any drug-related bill under the pretense of overdose concerns.

The reality is you can overdose on Tylenol,” she said. “Ivermectin has one of the safest track records of any drug.”

The use of human-grade ivermectin became controversial when some doctors began promoting it for the treatment and prevention of COVID-19. Government agencies including the FDA and CDC issued warnings against its use while groups like Front Line COVID-19 Critical Care Alliance (FLCCC) heavily promoted it.

Some doctors were  disciplined for prescribing human-grade ivermectin for COVID-19 including a Maine doctor whose medical license was suspended by the state.

Read more here...

Tyler Durden Thu, 06/30/2022 - 20:30

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Economics

The One Housing Chart That Shows A ‘Buyer’s Market’ Has Returned

The One Housing Chart That Shows A ‘Buyer’s Market’ Has Returned

The red hot pandemic-era housing market is cooling as historically tight…

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The One Housing Chart That Shows A 'Buyer's Market' Has Returned

The red hot pandemic-era housing market is cooling as historically tight available inventory shows signs of reversing. 

An affordability crisis has removed millions of new home buyers as the number of active US listings soared 18.7% in June from a year earlier, the most significant increase in Realtor.com's data going back to 2017, according to Bloomberg. The days of insane bidding wars, waiving home inspections, and putting in an offer 20% or more over the list price appear to be over. In other words, a buyer's market could be emerging. 

"While we anticipate that more inventory will eventually cool the feverish pace of competition, the typical buyer has yet to see meaningful relief from quick-selling homes and record-high asking prices," said Danielle Hale, chief economist for Realtor.com. 

Austin, Texas; Phoenix, Arizona; and Raleigh, North Carolina saw active listings more than double from a year ago. Nashville, Tennessee, active listings jumped 86%, and 72% in the Riverside, California. 

The Federal Reserve's most aggressive tightening campaign sent the 30-year fixed-loan mortgage rate from 3% to over 6% this year (back in March, we warned coming rate explosion would trigger a housing affordability crisis), removing millions of new home buyers who can't afford the cost of homeownership as the median existing-home sales price was around $407k in May. 

Even though inventory is historically tight, supply is expected to increase in markets across the country as demand for loan applications among prospective buyers slumps. Fewer buyers equal more inventory. 

The takeaway is that inventory is rising as homes stay on the market longer because demand evaporated thanks to the housing affordability crisis -- this could mean a housing top is nearing. 

Tyler Durden Thu, 06/30/2022 - 18:50

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Economics

States Need To Avoid ‘Cures’ That Can Make Inflation Worse

States Need To Avoid ‘Cures’ That Can Make Inflation Worse

Authored by Regina M. Egea and Danielle Zanzalari via RealClearPolicy.com,

Across…

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States Need To Avoid 'Cures' That Can Make Inflation Worse

Authored by Regina M. Egea and Danielle Zanzalari via RealClearPolicy.com,

Across the United States, state governments are awash in cash. In a sharp contrast, American taxpayers are enduring a rate of inflation unseen in four decades, with the costs of everything from food to gasoline at record highs.

In our home state of New Jersey, Trenton is looking at an unprecedented surplus of $8 billion through a combination of increased tax revenue, federal pandemic aid and borrowing.

A natural impulse among residents and policymakers is to offer residents “relief” in the form of rebate checks.

The reality is that relying exclusively on rebates or direct cash transfers to individuals will only lead to more inflation as this puts more money in consumers’ hands exacerbating the same problem as today - too many dollars chasing too few goods.

Rather, it is prudent that states focus on long-term investment and responsible budgeting to ensure economic growth now and in the future. This is especially important in high tax, big spending states due to the greater flexibility in work arrangements that have exposed the reality that wealth is mobile.

With more residents fleeing high tax states to low tax states, states will need to reevaluate their tax and regulatory climate to stay competitive. 

Regulation can raise the costs for consumers and slow job growth. A series of studies shows the regulation raises prices and worsens poverty.

Working with local governments to revisit restrictive laws that contribute to higher housing prices, such as building height restrictions and zoning rules, as well as removing unnecessary restrictions on business operations will lead to more economic growth.

Another way states can aid productivity and long-term economic growth with their temporary budget surplus, is to fund training programs for middle-skilled jobs.

Nearly every industry has experienced labor shortages and that reality is especially acute in trades like auto, refrigeration, HVAC, electrical, welding, and manufacturing.

States can invest in these skills through high school and vocational school programs. With college borrowing costs astronomically high, this encourages individuals to pursue careers that are lucrative and budget friendly, as well as fill the over 75,000 job openings that our state of New Jersey is projected to need in just a few years.

To further long-term economic growth many states should also concentrate on fixing their unfunded pension liabilities for public employees. This impacts red and blue states alike, with massive liabilities in California ($1.53 trillion), Illinois ($533.72 billion), Texas ($529.70 billion), New York ($508.70 billion) and Ohio ($429.53 billion). Here in New Jersey, our liability is nearly $40,000 for every resident of the state, which can dramatically deter future growth. Beyond using some of states’ budget surplus to shore up pension liabilities, states should move public employees to defined contribution plans, which are used by more than 100 million Americans. These are found to have better investment returns than state-wide pension plans and cost taxpayers less.

Our final recommendation is perhaps our most important: Save for a rainy day. If the U.S. economy enters into a recession, this will mean fewer jobs and less tax revenue for states. To prepare for the future when states again face a budget shortfall, which may be sooner than we think, states should follow best practices of reserving 10% of their budget in a rainy day fund, to sustain essential programs should a downturn occur in the future.

As state leaders consider their budgets, they should focus on long-term economic growth initiatives. Proposals like funding middle-skilled job trainings ensure workers are ready for the next decade, whereas eliminating unnecessary regulations and focusing on pro-growth tax reforms encourages residents to build businesses and create jobs. Lastly, taking care of state finances by properly funding state employees’ retirement plans and saving for a rainy day will ensure that no state is left behind in the next economic downturn.

Tyler Durden Thu, 06/30/2022 - 17:50

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