Menu
Menu
Menu
Menu
Menu
Menu
Menu
Menu
Menu
Menu
Hosted by Byohosting – Most Recommended Web Hosting – for complains, abuse, advertising contact: o f f i c e @byohosting.com
https://www.worldysnews.com/print-edition-waveswithout-ships-on-may-day-the-management-of-the-panhellenic-maritime-federation-pno-honoring-the-struggles-of-workers-and-seafarers-for-labor-day-and-recognizing-the-timeless-mes/
Unlocking Consumer Spending Potential: How Adjusting the Mortgage Market Could Inject $3 Trillion into the Economy
The Potential Economic Stimulus in the U.S. Housing Market
According to financial expert Meredith Whitney, the U.S. housing market holds the key to a significant economic boost without the need for government spending. Whitney, known as the “Oracle of Wall Street” for predicting the Great Financial Crisis, sees an opportunity for growth amidst warnings of the “crisis of the American male” impacting the economy.
Proposed Mortgage Market Reform
Whitney highlighted a proposed reform in the mortgage market that could bring about substantial changes. Freddie Mac, a major player in mortgage finance, recently requested permission to enter the secondary mortgage market, specifically focusing on home equity loans. These loans allow homeowners to borrow against their home equity for various purposes such as vacations, weddings, investments, and more, potentially injecting more money into the economy.
Potential Economic Impact
If Freddie Mac, along with Fannie Mae and Ginnie Mac, were to engage in home equity loans, it could result in a significant stimulus. Whitney estimates that this move could put $1 trillion into consumers’ hands by summer and $2 trillion by autumn, with a potential total stimulus of $3 trillion. This injection of funds could help revitalize the economy, especially as banks have reduced their involvement in home equity loans since the financial crisis.
Benefits for Older Americans
Whitney emphasized the importance of this proposal, particularly for older Americans facing financial challenges. Rising costs of homeowners insurance and property taxes have forced many older individuals to take on more debt, leaving them vulnerable to unexpected expenses. Expanding access to home equity loans could provide relief to this demographic without adding to government debt.
Economic Considerations
While concerns about inflation persist, Whitney believes that the timing for such a stimulus couldn’t be better. Despite a cooling wage growth indicated in the April jobs report, consumer demand remains strong, potentially offsetting inflationary pressures. By leveraging home equity loans, the economy could receive a significant boost without relying on government funds.
Stay informed about corporate finance trends by subscribing to the CFO Daily newsletter. Sign up for free.
Related
The US Federal Reserve Maintains High Interest Rates – Impact on Inflation and the Economy
last week The US Federal Reserve or Fed maintains the policy interest rate at 5.25-5.50 percent per year as expected by the financial market. Ready to point out that interest rates will remain high. Until the Fed is confident that inflation will fall to its target of 2 percent before starting to cut interest rates.
last week The US Federal Reserve or Fed maintains the policy interest rate at 5.25-5.50 percent per year as expected by the financial market. Ready to point out that interest rates will remain high. Until the Fed is confident that inflation will fall to its target of 2 percent before starting to cut interest rates.
The question is why hasn’t inflation gone down? And what will be the economic direction from now on? This is the point of writing today.
Federal Reserve Bank Monetary Policy Committee last week It was decided to maintain the policy’s interest rate at 5.25-5.50 per cent per annum for the next month. 8 reasons economic activity in the US is strong Inflation remains high and there is no progress.Inflation ratefalling to the target of 2 per cent per annum
View inflation as a risk athe US economyThere is uncertainty, which causes the rateinterestIt will remain high for as long as is appropriate. Willing to delay reducing government bond payments All note that the economic picture has changed before. Inflation is not falling as quickly as we would like to see. As a result, interest rates cannot be adjusted downwards.
The US economy expanded in the first quarter but slowed to 1.6 per cent, driven byDomestic expenditure, especially consumption Meanwhile, investment slowed as interest rates increased. The labor market is quite tight. Demand is greater than supply but the imbalance is reducing.
There were 303,000 jobs in March, a high level with the unemployment rate at 3.8 per cent Wages continued to increase but at a lower rate, with the labor supply benefiting from re-entrants and international migrants.
Inflation in the United States is still above the target of 2 per cent per annum, which is the goal of the Monetary Policy Committee In March, headline inflation was 3.5 per cent per annum, higher than the inflation rate in February of 3.2 per cent and the January rate. 3.2 per cent.
For core inflation excluding food and oil the March figure was 3.8 per cent, the same as February. A decrease from a 3.9 per cent increase in January.
Acceleration of inflation during the first three months of this year In particular, the numbers for March came out much higher than expected by the market. This raises the question of whether the US Federal Reserve will go back and raise interest rates to take care of inflation.
On this issue, the chairman of the Federal Reserve clearly confirmed during the press conference that there will be no increase in the interest rate at the next meeting. That is in June. But he did not mention the interest rate trend in the second half of the year. This is understandable because it will depend on various numbers that come out, especially inflation numbers. What is worth noting is that the short-term inflation expectations of the business sector have started to increase.
The question is, why has inflation in the US not continued to fall? But it has stood at this level for more than six months. And if interest rates do not fall because inflation is still high What will the world economy be like?
As far as evaluating The factors preventing inflation from falling to a level of 2 per cent per annum come from:
one The US government’s COVID stimulus spending is at a record $5 trillion. These funds still have an impact on the economy. This is money that the government pays directly 1.8 trillion to citizens and their families, 1.7 trillion to businesses, 1.5 trillion to local governments and others, including 1.5 trillion dollars to public health.
Related content
that these funds still have an impact on the economy Because some of it has not been used yet or has just been taken out to spend, like the almost 800 billion dollars given to local governments. It is given through the Ministry of Finance, which must agree on how it is used. And there is a payment time until 2026, which means that these funds can be gradually used even after the outbreak of COVID is over.
for money paid directly to the public Some people save and don’t spend because it’s for everyone. Not discriminating according to need People who save use the money they have saved to spend. As a result, private consumption accelerated during the first quarter despite higher interest rates.
As a result, the rate of consumption-related inflation has increased accordingly. Especially the food, energy, rent and services categories, which are clear in the March figures.
two As a result of the increase in asset prices during this year, such as stocks, Bitcoin, and gold, people who hold these assets feel richer (Wealth effect), increasing spending and consumption.
three Structural factors and relationships in the world economy have changed. such as political instability geopolitics economic division trade barriers Disruption to production as a result of war These things increase costs to the global economy, causing world inflation to rise.
The first two factors can be seen to be the demand side of the economy. This impact on inflation is likely to disappear with spending from stimulus funds during the COVID period. or profit from asset prices ending The rest are side effects of supply or third factors that will be permanent.
As a result, inflation below two percent may never happen again. Because the world economy has changed. And if the Fed still confirms its target of two percent. Interest rates can stay high for longer than they should. This will affect the world economy in two cases.
First case The economy is slowing down due to high interest rates. There is a risk of recession. Domestic spending has fallen so much that inflation has fallen. As a result, interest rates can be reduced. which helps support the slowing economy from going into recession. It is a scene of a hard landing.
Second case The economy is slowing down due to high interest rates. There is a risk of recession. Domestic expenditure fell significantly but inflation did not fall as in the first case due to third factors such as geopolitics. worsens and puts pressure on inflation to increase, for example, the price of oil increases even more The result is that the economy slows down together with high inflation. It is a scene of stagflation.
This is a possibility. For this reason, the Federal Reserve and other central banks may need to do so. The inflation target must be considered consistent with the changing structure and relationships in the world economy.
So that interest rates can fall more quickly to avoid the second scenario. and allow monetary policy, namely interest rates, to play a role in overseeing the economy with full flexibility and capacity.
Column Bachelor in Economics
Bandit Nichathawoorn Dr
Chair of the Public Policy Institute for Society and Good Governance
[email protected]
#world #economy #continue #inflation #Interest #rate
Related
The US Federal Reserve Maintains High Interest Rates – Impact on Inflation and the Economy