Four Rate Hikes in 2018 as US National Debt Will Spike

Chorus gets louder. But no one will be ready for those mortgage rates.

It didn’t take long for rate-hike expectations to be jostled further by last week’s “monster” two-year budget bill that Congress passed with its usual gyrations, including a government mini-shutdown, and that Trump signed into law on Friday. The bill increases spending caps by $300 billion over the next two years. It includes an additional $165 billion for the Pentagon and $131 billion for non-defense programs.

The bill comes after the tax cuts slashed expected revenues by $1.5 trillion of the next ten years. So pretty soon this is starting to add up.

Going forward, the US gross national debt will likely balloon at a rate of over $1 trillion a year, every year, even during the best of times. It’s $20.5 trillion currently [update 3 hours later, after debt ceiling suspended: $20.7 trillion]. It will likely be over $21.5 trillion a year from now – and this when the US economy is expected to boom. Any downturn will cause the debt to spike.

And what will the Fed do?

Four rate hikes this year – that’s what Credit Suisse’s US economists said in a research note on Monday. Previously, they’d expected three rate hikes for 2018.

“The FOMC has already boosted their growth outlook for 2018 in light of the tax bill passed in December and we anticipate another upward revision to their growth forecast at the March meeting,” the economists wrote in the research note, according to Reuters.

“With the economy near (or above) full employment, prudent risk management suggests the Fed ought to accelerate their tightening in response to a large positive demand shock,” they said.

In this cycle, the FOMC has raised its target range for the federal funds rate only at meetings that were followed by a press conference. There are four of them this year. This would mean that the Fed would announce a rate hike during each of them.

Credit Suisse added its voice to a growing chorus. Goldman Sachs, back in November and repeated on February 1, said that the strong momentum of the economy, which is boosting wages and inflation, would push the Fed to hike rates four times in 2018. This was before the “monster” budget materialized.

On January 26, also before the budget deal was done, BNP Paribas’ chief economist cited stronger growth and inflation prospects for upping their forecast to four rate hikes in 2018.

Other voices too are now talking out loud about four rate hikes. Even at the Fed, the phrase “three or four” rate hikes for 2018 is now no longer taboo.

On February 2. San Francisco Fed President John Williams, who is being considered by the White House as Vice Chair of the Fed’s Board of Governors and is a voting member of FOMC this year, told reporters after a speech that the Fed could raise rates three or four times in 2018. “Both of those possibilities are reasonable to think about, at this point, as options,” he said.

“The expansion is proceeding at a good pace, unemployment is low, and inflation is finally headed in the right direction again,” he said. This too was before the monster budget deal.

Cleveland Fed President Loretta Mester, a voting member this year on the FOMC, said on January 18, before the budget deal was even on the horizon, that the Fed should raise interest rates “three to four” times in both 2018 and 2019. She pointed specifically at the tax cuts.

So let’s crunch the numbers for a moment.

If the Fed raises its target range for the federal funds rate four times this year – so to a range of 2.25% to 2.50% in December – and if the still relatively flat yield curve remains relatively flat without steepening, the 10-year Treasury yield would reach about 3.85% by December.

But if the yield curve steepens toward a more normal-ish slope, it would push the 10-year yield somewhere near or above 4.5% by the end of this year. And this would likely cause the 30-year fixed-rate mortgage rate for top-tier borrowers, which is currently at around 4.5%, to rise above 6%, by the end of December.

And if 2019 also sees four rate hikes, those mortgage rates are likely to climb above 7% by the end of 2019. No one is prepared for this. Four rate hikes a year don’t sound like much – until it starts adding up.

It was one gigantic party. But wait… The State of the American Debt Slaves

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  112 comments for “Four Rate Hikes in 2018 as US National Debt Will Spike

  1. Hirsute
    Feb 12, 2018 at 3:06 pm

    Re: Fed to make 4 rate hikes a year for 2018 and 2019

    [Channeling Robert Conrad from the old Duracell commercial] – “Go ahead, I dare you.”

    • Joan of Arc
      Feb 12, 2018 at 6:20 pm

      Conrad? The Fed is more like the Duracell wabbits. That excludes Bugs who was a bunny, not a hare.

      • Feb 13, 2018 at 8:14 am

        Every 1/4 point hike will increase interest payments on the National Debt by 50 Billion .

        • Brian M
          Feb 13, 2018 at 6:33 pm

          Who cares? The vampires will get paid a little more! Profit!

    • Tom kauser
      Feb 12, 2018 at 7:45 pm

      Powell makes the call to break all hung juries. The Fed is always behind the curve because of interest on excess reserves and if ain’t handing out free money than they are the problem?

  2. Pat
    Feb 12, 2018 at 3:10 pm

    I can see this making already unaffordable real estate even more unaffordable…..until we hit the breaking point…which you’d think would have already been hit by now

    • Edward
      Feb 12, 2018 at 6:21 pm

      I agree it’s global and is called the “Affordability Crisis” Officially a global issue that’s going to get worse and has been the case in many areas for a long time. As far as full employment don’t make me laugh those numbers totally rigged like CPI and I can keep going.

    • Joan of Arc
      Feb 12, 2018 at 6:25 pm

      There are two kinds of people. People who own houses and want them to go up, and people who don’t own houses and want them to go down. I don’t think there are any other kinds of housing people.

      • Gary
        Feb 12, 2018 at 7:17 pm

        Well housing affects rents, which is important to many.

        • alex in san jose AKA digital Detroit
          Feb 12, 2018 at 9:30 pm

          Maybe those who just don’t care? It takes an insane amount of work to earn enough to buy a house and that’s if you have the insane good luck to find a job that pays over a subsistence level.

          The guy I work for works insane hours to support his McMansion lifestyle and even then he can only do it because he has a stratospheric IQ and the good luck to know the guy who owns the company he works for. And for all his nutzo hours, high IQ and good luck he’s really only doing barely as well as his high-school grad dad who fought in WWII and worked for the post office for the rest of his career.

        • alex in san jose AKA digital Detroit
          Feb 12, 2018 at 9:38 pm

          I should enlarge on this:

          Since it takes insane amounts of work and luck to become part of the home-owning class these days, and many younger people are smart enough to realize this, and also that college is less and less likely to give a positive return on investment. what’s the solution? Even if you want to work yourself to death to buy things, that’s not even generally possible these days.

          So many have come to the conclusion that the only solution is to (gasp!) own less things. If you listen carefully, you can hear George Washington himself gently spinning in his grave because this is about as Un-American a thing to do as there can be. Old George, owner of vast tracts of land and many, many slaves, fought a revolution to found a country based on the idea of “more” and here are people saying now that “more” is crazy and sanity lies in the direction of “less”?

          This is because for the majority, “more” is just not possible. This is why van-dwelling and “tiny houses” and all that are so popular now. Given that there are several empty houses in the US already for every homeless man, woman, and child, there’s a lot of housing out there and given that you’ve got a whole generation who can’t buy a house, ever, I don’t know how housing prices will be able to stay afloat in the future.

      • TXRancher
        Feb 12, 2018 at 9:49 pm

        “I don’t think there are any other kinds of housing people.”

        People who own houses to live in and don’t care if they go up or down.

      • JZ
        Feb 12, 2018 at 10:06 pm

        I own house and I want house to go down. i want everything to go down so that my expense gets cheaper. Those who wants what they own to go up and what they don’t own to go down is the kind I do NOT respect and want to stay away from.

      • In Denver
        Feb 12, 2018 at 11:40 pm

        I own a house, and would like the prices to come down. On paper, the price of our house has more than double in seven years.

        It’s great, if I want to leave the area. I don’t, so it does me no good. It also means young college grads can’t buy here. That’s not good either.

        • Setarcos
          Feb 13, 2018 at 9:03 am

          Correct, houses are not a liquid asset. However, if you are willing to sell at an obvious discount and there are any buyers, your house will sell. To say you don’t benefit is annoying to anyone living in a house that is not appreciating or a house that won’t even sell at a discount.

        • AlsoInDenver
          Feb 13, 2018 at 11:28 pm

          This place is nuts. I have no debt, a great job with the most pay I’ve ever had, [what feels like] a nice little nest egg, and I’m still fighting other buyers for crappy townhouses. Not sure I’m even interested in buying here in Denver anymore.

      • Dan Romig
        Feb 13, 2018 at 7:37 am

        Joan, I am pretty sure there is a third kind such as myself. I own a house with no intention of selling it, but I don’t want it to go up in value as this affects my property tax payouts.

        As others have commented, a real estate market crash will affect municipalities’ property tax revenues.

        • A/C in SD
          Feb 13, 2018 at 10:46 am

          Dan, In CA we don’t have to worry too much about our property taxes going up due to Prop 13 that limited the amount of annual increase to a 1.3% cap (or something like that). That is, if you have had the pleasure of owning a home for several decades or were able to inherit one. But if you outright buy one of these overprices shacks you’ll pay through the nose as the taxes are then based on the new sale price. A $600K home will cost you $10K a year in taxes, for life!

          As far as municipal revenues tanking I could care less. Out here they are happy to tax us to death to feed all of their progressive programs in an attempt to achieve social equality for all. I for one am tired of supporting those who are forever at the trough.

          They rob selective Peter to pay collective Paul! Kipling had it right and that was over 100 years ago.

        • d
          Feb 13, 2018 at 7:05 pm

          “As others have commented, a real estate market crash will affect municipalities’ property tax revenues.”

          SHOULD

          We have more Value volatility events than you.

          When values go down. TAXES Generally dont, or follow so slowly, that the effect is the same as no reduction.

          As they always spend more than they collect. Mainly on their salaries and pensions.

      • chris Hauser
        Feb 15, 2018 at 9:51 pm

        i agree.

        except for the people who think they are special.

    • d
      Feb 12, 2018 at 7:57 pm

      These things take time to flow through.

      P 44 is goosing the economy heading into 2020. For Obvious personal reasons.

      Unless something bad happens, the real SHTF session, will be post 2020 IMHO.

      It is possible that the Correction which may not be over, was simply a sightly over reaction to FED Head changes. Again time Months not week’s will be needed to asses this.

      Unless as previously stated, something bad happens, the it could all unwind, in 24 SECOND’S.

    • Frederick
      Feb 12, 2018 at 11:58 pm

      Oh it’s been hit alright For me anyway

  3. Old Engineer
    Feb 12, 2018 at 3:19 pm

    Well, Wolf, I know you have been right so far. But I just doubt American resolve to deal with the issues in addition to the mortgage rates that significantly higher rates will cause. The Federal government isn’t the only government that has borrowed like there was not tomorrow. States and localities are heavily in hock as well. And although student loan rates are already high, at some point I would assume they will go up as well as credit card and automobile loans.

    I’m not as sure as you that all of these increases will actually happen.

    • Feb 12, 2018 at 6:12 pm

      I’m just trying to read the tea leaves. I’m not sure about anything.

      Housing is very slow to visibly change direction as a nationwide average. We saw that last time. They were talking about a “plateau” for a year, expecting further price increases at the end of that plateau. The market was slowly turning south in some cities but was still rising in others. In some places, the downturn started in 2005. Others began slipping in 2006. San Francisco peaked in Nov 2007 (the last major housing market to go) and then headed south for four years.

      In housing, everything moves in slo-mo. Homes sit for sale for a while. Then it takes 2-3 month for a sale to close. So I don’t think housing will show a downturn as a nationwide average on a year-over-year basis for quite a while. Not this year.

      The real economy is pretty strong, and it won’t react very quickly to higher rates either – unless credit freezes up for some reason. If credit freezes up, the Fed will change direction or at least halt the rate increases. But for now, I don’t see that.

      In other words, I don’t see the big signs in the economy reacting to the rate increases this year. Maybe next year, the first real signs become visible.

      The Fed knows that “normalization” isn’t going to be pain-free. It is expecting asset prices to drop. If stocks and bonds go down in an orderly fashion without tanking the economy and without credit freezing up, I think the Fed will stick to its guns.

      This should have been done years ago before the excesses built up like this. And that too may be part of the Fed’s thinking … I’m just reading tea leaves here :-]

      • Old Engineer
        Feb 12, 2018 at 6:55 pm

        Your analysis seems very credible. I have learned over the years that the worst case scenarios that I can envision seldom come to pass. But you make one very good point: it is preferable to take the pain in a controlled fashion with periodic rate increases, and everyone knowing ahead of time where things are going, than to have a credit freeze up or rapid unplanned increase.
        I prefer your reading of the tea leaves to my imagination’s worst case scenario!

      • d
        Feb 12, 2018 at 7:59 pm


        Beware, when tealeaves align with Logic.

      • Steve Graves
        Feb 12, 2018 at 8:18 pm

        Equities, however, which are probably even more overvalued than housing, will react far more swiftly if the recent mad-dash return of volatility is any indication…

        • Feb 12, 2018 at 9:04 pm

          Yes, very likely.

        • Feb 13, 2018 at 7:13 am

          And when when they do, so will the bid for a lot of those luxury homes.

      • Lenz
        Feb 12, 2018 at 9:06 pm

        What does an “orderly downturn” look like?

        Is it when the same market players gaining on the cheap credit are given enough time to position themselves to benefit from the drop as well?
        Take Blackstone for example, 9 billion worth of real estate sale to Asian investors during the good times, now about to buy the Wardorf Astoria back from them, i’m sure at a discount.

        As a middle class person wanting to purchase a home/investment home. When will my turn come?

        • Feb 12, 2018 at 10:21 pm

          “orderly downturn” is a latex expression that can be stretched a lot…. So I think 1% to 4% variations per day, up and down, with downward bias, and some quiet periods in between, would be within the definition. 10% down in one day would clearly exceed my understanding of the definition. 10% to 20% down in a year would be within my definition of the term. 40% would probably be outside. Something like that.

        • JZ
          Feb 13, 2018 at 12:39 pm

          The market players are like packs of wolves. When the FED money showers everybody, they are tamed. When the FED stops showering, these wolves will have to eat each other in order to have green on their own books. You can NOT ask the wolves to go “organized” starvation where everybody has red in their books. They will eat each other alive and the question becomes whether the FED will step in and stop the fight. But he FED has to see blood and dead body first.

      • Frederick
        Feb 13, 2018 at 12:00 am

        People like Peter Schiff and David Stockman have been saying that for years that the FED waited too long

        • Feb 13, 2018 at 12:31 am

          I agree. I’ve lambasted the Fed for years for its “scorched-earth” monetary policies, as I call them. In my opinion, it should have never done QE and ZIRP. It correctly played its role as lender-of-last-resort during the Financial Crisis via the different loan programs it had at the time. But those loan programs were unrelated to QE, and all those loans have been paid back.

          QE was designed to inflate asset prices. Seen another way, it was designed to destroy the purchasing power of labor with regards to assets. That was a terrible thing to do. I will never forgive the Fed for that. That’s one of the reasons I started my blog (back in the day, “Testosterone Pit”).

          These days, I try to not let my disgust with what the Fed had done get in the way of the analysis of what it might do next.

        • d
          Feb 13, 2018 at 12:45 am

          “These days, I try to not let my disgust with what the Fed had done get in the way of the analysis of what it might do next.”

          As most FX traders understand “Dont fight the FED”.

          To be vaguely successful as an FX trader an insight into what the FED may do next, for whatever warped or unethical reason it has, is imp[ortant.

          Recapitalising corrupt EXCESSIVE RISK TAKING Banks, at the expense of savers, was and is criminal, it is however what was done.

          As we both Know, crying about it will solve nothing.

          So just like the Jew’s. NFNFJMO Never forgive, Never Forget, Just move On.

  4. JM Keynes
    Feb 12, 2018 at 3:19 pm

    – Will there be 4 rate hikes ? I doubt it. I just take one step at a time.
    – When I look at the 3 month T-bill rate then I think that there’s one rate hike coming. Because that rate just moved crossed the 1.5% mark.
    – If the economy decends into a recession (as a result of rising long term rates) then I think that short term rates will actually fall. perhaps even as low as (close to 0%).

  5. Feb 12, 2018 at 3:21 pm

    STPZ -.58% YTD; TIP -2.15% YTD; WTIC -2% YTD; FLRN off its highs;Gold up 1/2% off the highs of 4%. Hey I want you all to buy this stuff with both hands because evidently some dumb investors unloaded shares in the stock market panic, and no one told them the Fed is hiking rates four times.

  6. OutLookingIn
    Feb 12, 2018 at 3:31 pm

    Historical fact:
    Fed “tightening” the money supply has always resulted in a down turn.
    Doing this while the economy is still sick deepens the coming recession.

    Looking back at the 08 financial crisis using the S&P 500:
    July 07 10.1 % decline
    October 07 Head fake dip
    December 07 12.9 % decline
    February 08 Head fake dip
    May 08 13.2 % decline
    September 08 Lehman Bankruptcy
    November 08 Bull trap #6
    May 09 Capitulation 45.6 % Crash

    The above market “correction” took 2 years to unfold and devastated many, just not the bulls who remained bullish dip buyers. This present economic situation has all the hallmarks of a repeat performance, except this time around it will be colossal.

    • Hirsute
      Feb 12, 2018 at 4:12 pm

      RE: bullish dip buyers

      They can thank the BernanQE put. That’s not too conspiracy theory for anyone, is it? If (and that’s a big if) the Fed lifted the put, when will we see it again?

      • OutLookingIn
        Feb 12, 2018 at 6:56 pm

        Hirsute –

        “when will we see it again”?
        No crystal ball here!
        One thing is sure – what goes up, must come down. Eventually.

    • James Levy
      Feb 12, 2018 at 4:46 pm

      There may be so much cash in the hands of the 1% that unless a solid majority of them head for the exits they may have enough money to buy into any downturn and stop the bleeding no matter what the fundamentals or the conditions on main street. When you force-feed trillions into the hands of a few hundred thousand and leave tens of millions one paycheck away from disaster, this is the malignancy that develops. We could have 15% unemployment and the DOW over 20,000.

      • Ketn
        Feb 12, 2018 at 5:15 pm

        Agree completely. If you have $50 billion in assets and lose $25 billion. You’re not going hungry. A stock market crash is an opportunity, not a problem.

        On the other hand, if you have $50,000 in assets and lose $25,000, you’re devastated.

      • economicminor
        Feb 12, 2018 at 8:36 pm

        Assuming that people with large net worths have any large amounts of cash is assuming a lot. Most people with a lot of net worth don’t even manage their money themselves. And a trader is always trading.. keeping the money moving… So the big net worth is in investments and I doubt all that much is in cash..

        just look at the net savings.

        So depending upon investment strategies such as how much is margin or hedged …

        Lots of high net worth people could easily be severely impacted by a large sell off in stocks, bonds, PE funds, CRE and then eventually in all real estate.

        If this is indeed a Kondraitiev Wave there will be lots of interesting consequences. Lots of swimmers left dry.. and exposed.

      • Lance Manly
        Feb 13, 2018 at 7:22 am

        The 1% have advisers and accountants that let them know it would probably be better to invest out side the US until the US crash is done.

      • HowNow
        Feb 13, 2018 at 9:14 am

        James, I consistently find your comments rewarding. But, in this latest argument, I think that the scenario is slightly askew. At some point the intrinsic value of assets must be reckoned with. If a company simply can’t keep up its earnings relative to it’s inflated market price, because the demand for its services or products dry up (increasingly impoverished consumers), its market value will fall. Also “money on the sidelines” may be an illusion in the sense that a lot of the value in the stock market is leveraged in one way or another, so, as valuations drop, there are consequences to one and all. The money in reserve may not be willing or able to make up for the cascading effects of devaluation.

    • alex in san jose AKA digital Detroit
      Feb 12, 2018 at 9:43 pm

      OutLookingIn – I call it the 07-08 crash because really, in what I was doing, selling techie stuff on Ebay, things were already crashing along nicely in early 07. And things had been sagging in 06. By 07 I had people saying to me that they wished they’d sold their house a year earlier as they’d lost $50k by waiting a year (or six months). That’s like someone waiting and losing $100k now.

      It was indeed a 2 or even 3 year tumble.

      • Gibbon1
        Feb 13, 2018 at 3:38 am

        Comment on the great depression. Economists think it started in 1928-29. But birthrates started declining two years before that.

        Roll this over. I had dinner with an old GF. She mentioned a friend of hers who is a single mother with an eight year old daughter. Mom has a job. daughter goes to school. And they are living in an RV.

        Go ahead try and square that with ‘the economy is fine’

        • Nick Kelly
          Feb 13, 2018 at 2:40 pm

          I’ve read quite a bit about the Depression and have never heard birth rates mentioned at all. Is the idea that an entire generation of John and Mary Whites saw it coming 2 years before any economist and decided to play it safe?

          The only other possible explanation I can imagine is that once the Depression started, (in 1926 according to this theory) they realized they had to curtail spending.

          But how would this affect the higher spending on everything from clothes to toys due to kids born in 23-25?

        • Gibbon1
          Feb 13, 2018 at 9:44 pm

          > entire generation of John and Mary Whites saw it coming 2 years before any economist and decided to play it safe?

          I think the farm economy in particular was getting squeezed by low prices and debt payments. And also urban working poor were feeling squeezed. What couples probably saw was not having enough excess cash to support yet another child and a general feeling that things weren’t getting easier.

      • Cynic
        Feb 13, 2018 at 8:06 am

        From my perspective in the high-end antiquarian book market, which is US-led, things went soft from 2004, went very bad in 2006, really crashed in 2008, and recovered more or less from 2010.

        Dealers tell me that US and other orders are now at their lowest level for 10 years -for what it’s worth as an indicator from a tiny but economically sensitive, market.

  7. Drater
    Feb 12, 2018 at 3:31 pm

    Ok, I’m officially retired from making predictions about the fate of our country…tt wouldn’t surprise me to see QE ramped up in 2018. I have no clue what’s going to happen and neither does anyone else.

    • Night-Train
      Feb 12, 2018 at 7:39 pm

      Good point. You can only effectively prepare for so many scenarios. At some point You just have to buckle up and hang on.

  8. Bead
    Feb 12, 2018 at 3:45 pm

    I wonder how a midterm election fits into all these surmises. The Prez seems fully capable of letting his inner Lyndon (or inner Richard) spill on the Fed. The narrative of triumph only works if people stay employed through 2018.

  9. Gunther
    Feb 12, 2018 at 3:57 pm

    Rates in Japan are still close to zero (0.06%) for ten year government bonds.
    Borrow yen for nothing and buy treasuries with it; the carry trade may come back.
    When Japan moves with US/EU rates the story may become different.

  10. Feb 12, 2018 at 4:03 pm

    Sounds like John Williams jawboning his way thru the crack up boom

  11. roger
    Feb 12, 2018 at 4:19 pm

    but there will NOT be so many rate hikes..

  12. BTilles
    Feb 12, 2018 at 4:40 pm

    I’m so old I can remember when 10 yr treasury yields were supposed to approximate growth in GDP, now estimated at about 5%.

    • Arnold Ziffel
      Feb 12, 2018 at 11:28 pm

      I may be older and remember when the lpwest tier savings account called a passbook account paid 5 1/4 compounded interest.

      • Night-Train
        Feb 12, 2018 at 11:54 pm

        I’m old too. I watched your TV show in first run.

  13. SimplyPut7
    Feb 12, 2018 at 5:34 pm

    I’ll believe it when I see it.

    Mind you, it would be nice to see pensioners make a decent return on lower risk fixed income investments again.

  14. Paul
    Feb 12, 2018 at 6:08 pm

    Although I agree with your premise on the rate cuts, all US corporations only paid 470bn in taxes and that number hasn’t gone up in 3 years. Hard to see the tax cut reducing that number by 2/3 per year.

    Also, since more multinationals will move from tax havens that should somewhat off set it.

    I think the tax cut was ill thought because if companies can pay 670bn in stock buybacks they can certainly pay taxes of 470

    • Setarcos
      Feb 13, 2018 at 10:35 am

      Buy backs are balance sheet transaction. Taxes are income statement. Consider … When I pay off my mortgage with cash, ceritus paribus, net worth stays the same. When I get a tax cut, I have new money to do something with.

      If there is a little wind in my sails, i use the new $ buy a better boat, add a sail, hire additional crew, etc.

      A key question is will you or I deploy the new $ in a more productive manner than the govt. If you don’t think you could, then think about that a while.

      • Paul
        Feb 13, 2018 at 10:53 am

        This has nothing to do with my post.

        US corporations [paid 470bn on 2.2 trillkion in income last year. That’s already a 20% rate, which means they are leaving money in tax havens. We’ve already seen repatriation.

        As to buybacks, corporations are borrowing the money. Sure, it affets balance sheets but who cares. All that matters is how it affects their credit rating.

  15. Julian
    Feb 12, 2018 at 6:30 pm

    Looking at some of the debt figures your recently posted it looks to me that the level of auto debt nor credit card debt has yet approached the per capita levels experienced in 2008, nor doubtlessly mortgage debt (unmentioned).

    I’d like to see a comparison on per capita debt levels.

    • Feb 12, 2018 at 8:10 pm

      You can ballpark that pretty easily, though I’m not sure how much sense that makes since student loans aren’t carried by the population but by students and ex-students, same with auto loans, credit cards, and mortgages: Many people have paid off their mortgages. Many more people have paid down their mortgages. Many people pay off their credit cards every month. No one needs to worry about them. It’s the bottom 20% of borrowers that are at risk. During the Financial Crisis, about 10% of the homeowners with mortgages defaulted. And look what it did.

      But here is an example, using Census population data:
      Jul 2017: 325.7 million
      Apr 2010: 308.8 million
      https://www.census.gov/quickfacts/fact/table/US/PST045216

      Total consumer credit in Q1 2010: $2.49 trillion => per capita: $8,061
      Total consumer credit in Q4 2017: $3.84 trillion => per capita: $12,438

      (Consumer credit = auto loans, credit cards and other revolving credit, and student loans; Mortgages are not included)

      • Setarcos
        Feb 13, 2018 at 10:42 am

        The student loan balance growth which is embedded in the “consumer credit” balance growth is most of the per capita increase. Card balances only recently surpassed 2008 levels.

        Consider income levels per capita and savings per capita comparisons also. Other than those increasing student debt, thinking that other consumer balance sheets look bettter than 08. Will look at this further.

        • Feb 13, 2018 at 11:13 am

          Correct, credit card balances are flat. But BOTH auto loan balances and student loan balances have surged.

        • ru82
          Feb 13, 2018 at 10:17 pm

          I wonder how many iPhones, iPads, and MAC computers were bought with the Billions of student loans the past 8 years.

  16. james wordsworth
    Feb 12, 2018 at 7:45 pm

    What will be interesting to watch will be the rapid increase in the interest on the debt.
    2015 407 billion
    2016 430 billion
    2017 457 billion
    Now 60% of the debt held by the public (total over $8 billion matures within years. Each 1% rise, just on that amount, will be $80 billion. The add in the new debt coming as well. Once this gets moving, it will really start to have an impact.
    Remember Japan is stuck at 0% interest because it can’t raise rates. If rates go up 1% then that alone would cost 25% of government revenues. (and already debt costs are 25% of revenue). The US will eventually be back at zero…. but it will take a little while yet.

    • d
      Feb 12, 2018 at 8:13 pm

      “Remember Japan is stuck at 0% interest because it can’t raise rates. If rates go up 1% then that alone would cost 25% of government revenues. (and already debt costs are 25% of revenue).”

      NOT So.

      As the majority of JGB, are currently brought by the BOJ, so the “Interest” is merely a paper transaction between BOJ and Treasury.

      Same situation did Exist in the US, prior to the Unwind/Normalisation Decision.

      Which I personally believe is aimed more at MBS that T’S, The FED However cant ring the Alarm, by dumping everything, except T’S.

      I would not be surprised to see some modification in the balance/atio of shrinkage, as the program progresses, to reduce the % of MBS as a whole even to Close to 0 in the FED’S Balance Sheet.

      I believe the FED may have reached the conclusion using housing as a National Economic ATM. Is long term counter productive.

      • Bead
        Feb 13, 2018 at 8:08 am

        Dudley didn’t reach that conclusion because he was bemoaning lack of home equity borrowing within the past year. Maybe he was an “outlier.”

    • Michael K.
      Feb 12, 2018 at 9:28 pm

      The Peter G. Peterson Foundation recently wrote about this subject as well, providing an analysis of CBO projections (which might very well be overly conservative).

      https://www.pgpf.org/analysis/2016/12/higher-interest-rates-will-raise-interest-costs-on-the-national-debt

      • will
        Feb 13, 2018 at 3:19 am

        Thanks for the link. Good writeup.

        Pretty sobering considering:

        “Under current law, CBO projects that interest rates on 3-month Treasury Bills will increase from 0.9 percent in 2017 to 2.8 percent in 2027, while interest rates on 10-year Treasury Notes will increase from 2.4 percent in 2017 to 3.7 percent in 2027.”

        And considering I can think of many scenarios where interest rates end up much, much higher than 2.8/3.7% – even the spread is low by historical standards.

      • Nick Kelly
        Feb 13, 2018 at 4:13 pm

        Yes a good write up and here is another brief quote:

        ‘Over many years, Congresses and Presidents of both parties have avoided making hard choices about our budget and failed to put it on a long-run, sustainable path. In fact, the tax legislation that was just enacted makes it even more difficult to achieve that sustainable path.’

  17. Thomas
    Feb 12, 2018 at 9:36 pm

    From those recent “lowest mortgage rates in the history of the world” to the rising (higher and higher) rates in the soon to be immediate future is an event which portends to be very serious indeed. Those ultra low rates were the bubble fuel of current housing prices. Pumped up from the loses of the last time, this time will cause even more damage. Sure, those nice folks who purchased $300,000 – $600,000 homes purchased at amazingly low rates. So what? As rates rise, people will only qualify for LOWER monthly payments. And in the face of rising rates do you think wise buyers will decide to buy “now” before rates go even higher? Or will those buyers begin to see prices come down as lower qualifying consequences works it’s undoing magic to housing prices? This is a very awkward housing market indeed. And I’m anxious to get my home sold SOON before the less-witted catch on.

    • Petunia
      Feb 12, 2018 at 10:35 pm

      The new tax bill is adding 1.5T per year to the already ballooning debt. In the 10 years the tax bill covers, that will add 15T to the 20T we already owe. The interest expense at 35T will be unsustainable, interest will have to go negative long before that.

      • Arnold Ziffel
        Feb 12, 2018 at 11:32 pm

        Given that the US dollar is the global reserve currency it is doubtful that it can ever go negative interest rate since the US financed deficits must be funded externally. If the US debt is fully monetized hello Weimar Republic.

      • Feb 13, 2018 at 12:20 am

        Petunia, it’s not quite that bad, thank goodness. The new tax bills is estimated to add $1.5 trillion over 10 (ten) years, so about $150 billion a year. That’s bad enough, but it’s not the total catastrophe that $1.5 trillion a year in additional debt would be :-]

        • Feb 13, 2018 at 10:43 am

          Yes but 150B a year in a zero growth economy would be a disaster, particularly if the money is spent on one time construction projects, or blackhole DOD. (Public debt crowds out private finance). No mention yet of what happens to corporate debt. What do they do when rates go higher, while their business remains constant, or gasp, multiples contract?

        • Petunia
          Feb 13, 2018 at 10:43 am

          Sorry, I have to stop watching the rants on liberal tv. Should have known better than to believe the fake news networks.

    • Frederick
      Feb 13, 2018 at 12:09 am

      Thomas If you haven’t sold by now you are already too late Better to take a small hit now or have a big one later

    • Jon Strauss
      Feb 13, 2018 at 4:53 am

      But what will you do when you sell, Thomas? Most people have to buy another house of similar size, especially those with kids.If prices don’t fall heavily for a few years it could be an uncomfortable time waiting while paying rent in someone else’s home.

    • Seen this all before, Bob
      Feb 13, 2018 at 11:12 am

      Thomas, I agree with you if:

      1) You are selling your house because you want to move to a lower cost part of the country where you can live like royalty.
      2) If you are staying in the local area that you currently reside and are downsizing. Though, houses in an area generally fall in tandem.
      You might take a hit now that mortgage rates have risen.

      My older relatives experienced this same economic condition. They bought in the mid 1970’s when rates were at 6%. In the 1980’s and 1990’s when mortgage rates rose to 12% peak, they were making 9% in a bank account while paying 6% for a mortgage. Housing prices did have dips but mostly followed inflation during that time.

      I like my house currently and area that I live. I hope I experience the same benefit my relatives experienced. I would love a 3.5% loan while my bank account was paying 6%.

      I also don’t think these low rates will last, and since I plan to live here for at least 10 more years, I don’t care if my house value falls this year. Inflation will keep my house value rising.

      • Seen this all before, Bob
        Feb 13, 2018 at 11:30 am

        One more comment.

        If you live in CA, and have lived in the house for awhile Prop 13 is your friend. If you sell and buy again in CA, your taxes may go up.

        My now-elderly relatives pay about $120/month for their paid off CA home because they didn’t sell at any peaks.

        ie they had no motivation to pay off the loan early while they were paying a 6% loan and making 9% in a savings account so they paid off their 30 year loan on schedule and now have $120/month beach houses thanks to Prop 13.

        My motivation for staying is the same as my relatives. I may be paying $700/month in 20 years for beachfront property, but patience pays off.

  18. Lori Takano
    Feb 13, 2018 at 12:02 am

    Near full employment? Really? I keep hearing that, but I don’t see it. Oh, that’s right, we don’t count those workers that have used up all their unemployment benefits and have given up trying to find a job in this booming economic recovery. Based on the numbers I’m aware of, if the U.S. government (for what it’s worth, which ain’t much anymore in my opinion) were to figure the unemployment rate the way they used to, it would be more like somewhere around 20%, probably even higher. What I keep trying to tell people is that if you took away everybody’s SNAP card, the bread and soup lines would be far bigger than they were during the Great Depression. And the reaction I usually get from the UN-ILLUMINATED is: HUH?

    • d
      Feb 13, 2018 at 12:06 am

    • Frederick
      Feb 13, 2018 at 12:11 am

      Of course the “official”unemployment rates are pure fantasy My wife and I gave up looking in 2014 sold the house and left the country so we aren’t counted Best decision I ever made

      • Gibbon1
        Feb 13, 2018 at 3:51 am

        > “official”unemployment rates are pure fantasy

        it’s not a fantasy, it’s just not named correctly (no surprise, because economists lie). What the ‘unemployment rate’ is, is a measure of short term employment ‘churn’.

        • d
          Feb 13, 2018 at 4:05 am

          (no surprise, because economists lie)

          WRONG

          The peopel releasing these State/Administration Statistics. Are not in the main Economists.

          The Majority of them are Statisticians or simply low level State/Administration Staffers.

          You make a lot of Negative Generalisations that have no basis in fact.

    • Feb 13, 2018 at 12:35 am

      If you want to know what the Fed might do next, it’s irrelevant what you or I might think unemployment or inflation or whatever is. What matters for the Fed’s decision is what the Fed thinks unemployment or inflation or whatever is.

      • fajensen
        Feb 13, 2018 at 9:19 am

        I agree that it is a valid approach to see the FED as some kind of machine running some kind of multivariant control system to keep an internal state matrix representing the real economy on a trajectory that is deemed to be “sound”.

        However, When ones control system uses faulty data, the internal state representation (world model) will be off too and then the FED risks to be wrongly responding to conditions that does not exits because the actual economy is very different from the model.

        The question is how smart the FED-machine is. In plant control engineering, and even in engine management systems, the smart, “model-based” control systems can degrade sensor inputs and / or assign probabilities to the measured values to work around broken or faulty devices until the techies get around to fixing them.

        In the same way it is possible that the FED actually doesn’t fully believe in many of the numbers they claim they absolutely use and trust when making decisions. It would make sense, because if the FED was too transparent, market players would be able to easily recreate the FED-machine, use the same inputs, and basically front-run the FED’s actions (I’d bet “they” have Russian PhD’s working on that modelling problem since forever).

        So, true, the FED may be using “wrong” data. Yet, It might still be in the ballpark right in its internal picture of the state of the economy and it might well not tell anyone what that picture is exactly.


        Ariane 5, using a hard-core control system strategy with no fluffy concerns over data validity built-in, did some of the best and most colourful displays of “model vs. reality” deviation bugs.

        https://around.com/ariane.html
        https://www.youtube.com/watch?v=gp_D8r-2hwk

    • Gandalf
      Feb 13, 2018 at 2:46 am

      According to the USDA website, as of November 2016, 43,196,899 persons were participating in SNAP.
      With 323.1 million Americans, that’s 13.4% of the population.
      The total numbers are also steadily declining from last year and previous years:

      https://www.fns.usda.gov/pd/supplemental-nutrition-assistance-program-snap

      https://fns-prod.azureedge.net/sites/default/files/pd/29SNAPcurrPP.pdf

      • Lori Takano
        Feb 13, 2018 at 11:57 am

        Let me tell you one of the main reasons I don’t trust the USDA. Back in the 2004-2005 time frame I ended up attending a special meeting in Colorado that had to do with bovine spongiform encephalopathy (mad cow). At that meeting were high-level government officials (state & federal) and medical and scientific personnel who were obviously, extremely knowledgeable (experts) regarding that disease. And I (moi) learned a hell of a lot about mad cow disease at that meeting, things that the public will never be allowed to know. So when I was in Alabama a few years later and a single case of spongi-form encephalopathy was found in one of our herds, and that the rest of the herd was not going to be tested because the USDA said that Mad Cow wasn’t contagious, 1) my jaw very nearly hit the floor, 2) I felt like laughing my fool head off, and 3) it taught me that you cannot trust the government, that is if you ever really could. What the government insiders know and keep to themselves is one thing, and what they tell the public is altogether something else (e.g. the difference between what Hillary tells the banksters, and what she tells us). It did not surprise me at all when I found out that the scientist who won a Nobel Prize for discovering the “prion” laughed when he heard about what the USDA had said about Mad Cow not being contagious, but he was smart enough to keep his mouth shut to anyone outside of his inner circle. Can’t do anything to jeopardize those wonderful government grants, you know. I trust the U.S. government today as much as I would trust the Federal Reserve, which 1) isn’t Federal, and 2) has no reserves. LOLs

        • Lori Takano
          Feb 13, 2018 at 12:09 pm

          Furthermore, if things are so darn great, then why do we have such freaking low interest rates, and so much freaking quantitative easing? I mean why would you need all that freaking stuff if things are so freaking wonderful? “The hardest thing to see is what is in front of your eyes.” – Johann Wolfgang von Goethe

        • Lori Takano
          Feb 13, 2018 at 12:53 pm

          Okay, let’s say there is some substance to those wonderful USDA numbers. I know someone on food stamps, and they keep cutting this elderly woman’s assistance at every turn, even though her situation hasn’t changed one iota. Given enough time, they’ll probably disqualify her too, and that will help to reduce those numbers even further. And let’s not forget that just a year or two ago, the USDA forcibly reduced the number (recipients) based on some silly logic that those people didn’t need food assistance even though in most cases, their situation hadn’t really changed, but food prices had. So what’s going on here? Well, one high-level government official, whose name I no longer remember, put it very succinctly. He said the government was basically broke, and could not afford to continue to provide welfare to the poor, the needy and the starving. However, when it comes to welfare for the military-industrial-complex and their continuing, ruinous, foreign wars money is no object, or should I say, debt is no object. There is profit in war, but there is no profit in hunger or homelessness. Furthermore, SNAPS is not the only food assistance program at the USDA. Last time I checked when including the others, the number rose to nearly 100 million. My parting shot, however, is how easy and simple it can be to reduce over 43 million Americans to a simple percentage. C’est la vive (such is life).

        • Gandalf
          Feb 13, 2018 at 4:55 pm

          https://fns-prod.azureedge.net/sites/default/files/pd/SNAPsummary.pdf

          That yearly summary shows you that the numbers of Americans on SNAP basically goes up whenever the economy is bad, and goes down whenever the economy is booming, with an underlying trend of overall total growth much faster than the rate of growth of the general population. For instance, if you take 1980 as a time point, if we had the same percentage of Americans on SNAP today as a percentage of the population, there would only be about 30 million Americans on SNAP, not 43 million.

          So that fact does tend to confirm what lots of economists have been saying, that America is increasingly becoming a land of haves and have nots. This goes along with the loss of good paying manufacturing, farming, mining, and even white collar jobs like middle management and secretaries and typists, as machines and globalization/off-shoring have removed those jobs. Even cashiers have become or made more efficient by machines (barcoding, self-checkout lines). Those jobs have usually been replaced with lower paying service jobs.

          If you ever were a fan of the TV show “The Office”, with Steve Carell and John Krasinski, which ran from 2005- 2013, my guess is that a lot of those sorts of offices have become automated/computerized and and their white collar work force drastically downsized in the last 5-10 years.

        • Gandalf
          Feb 13, 2018 at 5:27 pm

          Re: Mad Cow disease
          It took two Nobel Prizes to get this right – Stanley Prusiner got the Nobel in 1997 for finally identifying the prion, Carleton Gajdusek got it earlier in 1976 for his “slow virus” theory which turned out to not quite be correct.

          Prions are contagious, but not usually through airborne routes, like flu or TB. Blood to blood transmission can occur, like Hepatitis B/C. Transmisson through contaminated surgical instruments has been documented, despite the instruments having been thoroughly cleaned (prions are very resistant to cleaning solutions). Neurosurgical patients have had Creutzfeld -Jakob disease transmitted this way. A famous neursurgeon, whose name I can’t remember also came down with CJ disease, probably from having been contaminated by one of his patients.

          Prions can be buried with an infected animal or person, and remain infectious.

          In general, though, you have to eat a lot of prions to get infected, e.g. brain or spinal cord material, and the USDA now specifies these have to be removed from cows and not enter the food supply for anything.

          The Mad Cow disease epidemic in Britain was amplified by the use of contaminated feed – they were feeding processed cow offal and bone meal (which can contain the prions from infected cows) and this hugely amplified the spread of prions in their cattle and dairy herds.

          Other animals have prion diseases – scrapie for sheep, chronic wasting disease for deer, elk, etc. Scrapie has long been thought to not be transmissible to humans, but recent evidence suggests otherwise. Chronic wasting disease has been suspected of infecting venison eaters. The prions apparently can be shed through urine and persist in the soil where they can infect other sheep/deer through the vegetation, and may have also crossed over to cows feeding in these contaminated fields, helping to jump-start the mad cow epidemic in Britain.

        • Nick Kelly
          Feb 13, 2018 at 5:55 pm

          Wow. BSE hit the UK first. It was first identified by a vet who knew a lot about scrapie, a disease of sheep brain. He happened to go to a lecture where slides of cow brains were shown and said to associates: ‘that looks like scrapie’
          There was a major effort by the UK DA to kill this idea. Sheep remnants had been added to cow feed for years, so the link was obvious.
          Next step: the DA admits it crossed the barrier between sheep and cattle but: no danger of trans to humans.
          Next step: human diagnosed with human BSE.

          Then it really hit the fan and millions of cattle slaughtered.
          Any sigh today in the UK and they treat it just like foot and mouth: whole herd gone.

          So yr story surprises me.

    • Mark
      Feb 13, 2018 at 5:13 am

      Yes, the US economy is nearing full employment. Finally wages at the low end are moving up substantially as employers are having difficulty finding new hires. Look at the data for wage growth for the bottom 20%, it’s moving up much faster than anyone else.

      Anecdotally, everyplace I see that hires unskilled, minimum wage type workers is advertising that they’re hiring, and they’re offering wages above minimum wage with some benefits and even sign on bonuses. The gas station I frequent is advertising $12.50/hour with a $250 bonus for staying 60 days on the job. It’s still not what I would call a “livable” wage, but it is improving.

      Main problem I see now is those same people living on near subsistence wages will vote for politicians who want to gut programs that benefit “takers”, rather than see the truth that the economic system is rigged to exploit them, and leverage the power of their vote to improve their own lot.

      • DK
        Feb 13, 2018 at 10:59 am

        I’m in southern Arizona and I see “help wanted” signs everywhere. Albeit , low paying jobs. But one can buy a house here for under $200k. A couple can do ok even with a fairly low wages. Many attributing to Trump, right or wrong.

    • Rejected By Target
      Feb 13, 2018 at 10:58 am

      Up until last summer, both Indeed and LinkedIn would show the number of applicants statistic at the bottom of their job postings, and I routinely saw jobs gettings hundreds of applicants, and I’d wonder, is this really what “full employment” looks like today? One clerical typist job received nearly 200. I remember what “full employment” looked like here in southern New England back in 1990, the unemployment rate was something like 3% and when you advertised a job you were lucky if you got a couple resumes. I guess “full employment” is another one of those terms that now has a different meaning from way back then. (Strangely, both Indeed and LinkedIn have removed that statistic, I wonder why…maybe because I wasn’t the only one who noticed that it contradicted the “full employment” claim…)

      • d
        Feb 13, 2018 at 7:17 pm

        Full Employment is when transport operators. Have to pay good money and benefits, to totally unsuitable applicants, and put up with their substandard performance.

        As that is all they can get.

        Transport of Household good and produce, is still a very good economic indicator.

    • Cynic
      Feb 13, 2018 at 11:47 am

      Exactly: welfare today is about invisible lines to virtual soup kitchens.

      And synthetic clothes and shoes from China ensure that no one is in rags……

    • Observer
      Feb 14, 2018 at 3:23 pm

      21.8% according to Shadowstats.com, which charts the number using the pre-1994 method of calculating unemployment versus today’s, with an explanation of the changes and their effect on the resulting “official” numbers. Also read the explanation of CPI calculation changes made in the 80s and then 90s, as well as changes to GDP. You can see the difference in the handy graphs charting these numbers using calculation methods from all three decades. It’s a graphic illustration of the smoke and mirrors we have today.

  19. desmond
    Feb 13, 2018 at 7:11 am

    when a fed like that say something like ‘we have stopped QE’ it probably means that henceforth they won’t tell you about it..

  20. raxadian
    Feb 13, 2018 at 8:38 am

    Back in 2017

    “Okay guys we are gonna have rate hikes every three or four months next year. So at most we will have four rate hikes next year.”

    Idiots: No way the FED will keep raising the rates!

    “Uh, yes we will? We are even telling about it months in advance.”

    Idiots: Lalala, not listening!

    Now in 2018

    Idiot: Four rate hikes in a year? The FED is crazy!

    “Why do we even bother?”

  21. Paul
    Feb 13, 2018 at 9:23 am

    Obviously, an increase in the fed funds or discount rates has a bigger effect on lending than on rates. It has the effect of making thinly capitalized banks more risk averse. This will cut down on loans made by banks to finance things like accounts recievable, inventory or payrolls.

    This will probably be seen most on the margins. US companies or Eurozone companies using dollar loans will pare back. IMO, the areas most vulnerable are agriculture, transportation and in projects that have long durations, like mining.

    The area that probably got the biggest bangs from the low rates were commercial real estate, (which is a joke) and oil abd gas fracking.

    The effect could very well be stagflation caused by large scale borrowing in an atmosphere of economic collapse… like the 70’s.

  22. KiwiinCanada
    Feb 13, 2018 at 10:21 am

    The combination of increased supply of T bonds and the Feds planned QE unwind should force up long term rates. This will negatively impact some large pools of wealth. The stock market and real estate for example. As mentioned real estate works in very slow motion unless you have had some serious abuses as occurred in the period leading up to the GFC. Not so the equity markets.

    The dynamic could be long rates go up, stocks down, rotation into bonds once all the the re balancing models buying equity dips have had their heads handed to them a few times. This dance goes on with the relentless pressure on long term rates triggering the cycle repetitively.

    The Fed locking in the QE unwind is the key. If it doesn’t waiver than a reverse wealth effect gradually occurs. This potentially reduces the need for large rate increases at the short end.

    The rotation could be into the short end of the bond market as the only safe place in a risk off capitulation. The gradually increasing short rates providing some yield.

    • Paul
      Feb 13, 2018 at 10:38 am

      This can be seen where I live, in Buffalo, NY. In the city, (as well as the suburbs) there is an obscene amount of commercial building. In a city that hasn’t had an increase un population since the twenties, there are thousands of rentl units going up.

      The city is basically, changing sides in the titanic. There are areas in the near suburbs where you literally can’t sell a house at any price. Hotel construction is absurd. The latest expansion is a hospital that is being transformed into a megaplex with retail, apartments, condo’s and a boutique hotel.

      There are thousands of rental units going in a very small area. Home prices have quadrupled in the last 20 years.

  23. Bead
    Feb 13, 2018 at 10:35 am

    7% mortgage? I remember being thrilled with 7%. What will happen is frozen inventory until the robots chase enough people out of their jobs. The solution is a money printing contest among the central banks of the world. Get those assets airborne and those rates down.

  24. DK
    Feb 13, 2018 at 10:53 am

    Conforming 30 year fixed is around 4.3% as of yesterday. 3 or 4 rate hikes this year could easily place it above 5% by the end of 2018. I’ve got one more house to sell and I’m putting it on the market next month. I’m conservative, but I think the housing part is coming to an end in a year or so.

  25. kaj
    Feb 13, 2018 at 5:12 pm

    I don’t expect 4; may be, at most 3. Remember the balance-sheet is being shrunk slowly, but surely, and by March, 2018, it should be $20B/month, and, by the end of the year 2018, it should reach $40B/month. That stimulus is being withdrawn. Concurrently, increasing the Fed Funds rate to 2%, will take the mortgage rates to 5% or more. I just have a hunch that we will have a mini-recession and a stock market swoon by the summer end and Trump will start calling Jay Powell an ass or an idiot, ie, putting pressure on the Fed to stop the Republican Party’s early demise/lynching befor the November/18 election. Also, with this tax reduction both business and upper-income bracket savings will likely go into short term Treasury’s and keep the long-end rates higher, which might inflict heavy damage on the mortgage market.

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