Cutting the Rate is the Absolutely WRONG Thing to do; Which, is Why They Will Do It.

Posted on October 30, 2007
Filed Under Inflation, Interest Rates, Politics |

I’ve pretty much resigned myself to a rate cut from the Fed tomorrow.

But, it is the wrong thing to do for the economy. Yes, I know the bond market wants it, the stock market wants it and just about everyone out there is clamoring for it.

But…

Lower rates will

  • push the dollar further down
  • drive foreign investors OUT of the US markets
  • deepen the recession we are most assuredly in right now
  • increase the cost of imports into this country
  • drive inflation higher
  • eventually lead to stagflation like we saw in the 1970’s.

But, I am resigned to the rate cut tomorrow and also in December.

Then, next year, when it too late to help, they will start raising the rates and they will raise them too fast and too high and again make the problem worse.

The good thing is if you are properly positioned, meaning cash-heavy the bargains available in 2008 are going to be amazing. This year was good, but next year rents will not just inch up, they will lurch upward and landlords will find themselves with more quality applicants than they have available units.

Right now, I am on the sidelines for new real estate acquisitions. I am not increasing my position in the stock or bond markets. I am however, poised to pounce on great opportunities as they present themselves. I just don’t expect the really good ones to come until next year.

Comments

5 Responses to “Cutting the Rate is the Absolutely WRONG Thing to do; Which, is Why They Will Do It.”

  1. Eric S Doms on October 30th, 2007 1:17 pm

    Tim

    I guess that’s the beauty of property and that it moves in cycles :)
    As long as you aren’t too exposed, the REALLY good deals will be coming along……………now.

  2. debbie on October 31st, 2007 6:16 pm

    Looks like you’re right again Tim!

    Happy Halloween!

  3. Casey on November 3rd, 2007 12:35 am

    This is a good thing. While to many owners loose their home this will pressure the lenders to refinance and work with their buyers.

    Check out our site to get help with your foreclosure problems.

  4. Debbie on November 7th, 2007 10:57 pm

    Is this the Casey as in Casey Serin who responded after me?

    If it is the Casey Serin…..no thanx…….not interested in checking out your “new” website that I heard about.

  5. Tim on November 8th, 2007 6:38 am

    I don’t think that was Casey Serin, but the poster doesn’t seem to be any smarter about the market than the real Casey.

    Anyway, with the dollar continuing to tank and oil hitting new highs, mostly because of the ever worsening exchange rates it doesn’t matter. We are in a recession.

    Just because the patient doesn’t know they have cancer doesn’t mean it isn’t spreading and getting increasingly worse.

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