For all the drama in US Politics, you have to admit they run extremely well economically. Quick to keep rates high, good forecasting, good trade policies, good energy policies.
Europe is like a kid copying the US homework, trying to make the equations work.
Well, compared to most other countries I know about, US rates work a little differently.
Homeowner mortgages are (AFAICT) almost all fixed for the full term of the loan. So a rate hike doesn't immediately take money out of the pockets of a large proportion of the population. It may slow new home finance agreements, and affect a lot of other credit agreements, including the ability of business to borrow, but it doesn't kick a huge number of people right in the domicile.
Whereas here in Aus and in the UK (two places I've held mortgages) fixed terms are only available on a relatively short basis (1-5 years) and people won't take them out at all if they feel the rates are already a little elevated (like now), as there are penalties for refinancing in the fixed period. So interest rate rises directly impact people's pockets and threaten their housing stability.
So over here mortgage holders really do hate rate rises and feel personally aggrieved when the central bank raises them.
This situation conceivably makes tackling inflation easier - public spending plummets when rates go up - but it is massively unpopular.
The FED has done an amazing job and are utterly filled with the smartest people in the field. I love watching the q&a with members as they give such detailed and informative answers on just about everything. Worth watching if you are an econ nerd.
The Federal Reserve (The Fed) is supposed to work independently of the political process which is why we have the same Fed Chair as we did during the Trump years. Ironically this means the Fed Chair keeping rates high is the same one that set a zero base rate. The various Fed leaders operate under the same guise of serving outside the political cycles.
They’re still human so they can be swayed by Presidents and obviously have their own political leanings. In general the ability to not listen to politics allows them to make choices that are inconvenient for an election cycle but good for the US economy.
FYI, Trump has vowed to purge the executive branch of unloyal employees, aiming for unitary rule during his 2nd term. It’s unclear how much of this his conservative SC majority will allow, but…the norm of stable, institutional independence might be gone soon.
Nursie|1 year ago
Well, compared to most other countries I know about, US rates work a little differently.
Homeowner mortgages are (AFAICT) almost all fixed for the full term of the loan. So a rate hike doesn't immediately take money out of the pockets of a large proportion of the population. It may slow new home finance agreements, and affect a lot of other credit agreements, including the ability of business to borrow, but it doesn't kick a huge number of people right in the domicile.
Whereas here in Aus and in the UK (two places I've held mortgages) fixed terms are only available on a relatively short basis (1-5 years) and people won't take them out at all if they feel the rates are already a little elevated (like now), as there are penalties for refinancing in the fixed period. So interest rate rises directly impact people's pockets and threaten their housing stability.
So over here mortgage holders really do hate rate rises and feel personally aggrieved when the central bank raises them.
This situation conceivably makes tackling inflation easier - public spending plummets when rates go up - but it is massively unpopular.
bwb|1 year ago
realusername|1 year ago
You can be sure that the day the USD isn't viewed as the global currency, all this printing will come bite back hard and probably cause a collapse.
ilikerashers|1 year ago
Maybe China will have strong consumers in the future but then it'll have to ensure it can compete with US wages which erodes its competitiveness.
House always wins.
Moto7451|1 year ago
They’re still human so they can be swayed by Presidents and obviously have their own political leanings. In general the ability to not listen to politics allows them to make choices that are inconvenient for an election cycle but good for the US economy.
a_wild_dandan|1 year ago