"Would you like a side of hyper-inflation with your job loss and reduced fat retirement?"
That is the question our government would be asking you if they were your waiter. While I was doing this morning's mortgage market update, that thought came to mind as a great way to sarcastically explain the government's actions thus far.
With job losses mounting, the government claims they need to force through another stimulus package which creates more jobs, government jobs that is. And they did exactly that, well not exactly as the amount of jobs they actually will create versus what they claim will not equal each other, and it will be inversely proportional to how much the cost is. In simpler terms, they won't create the promised amount of jobs and it will ultimately cost more than what they said. Also, history shows that growing the government is exactly opposite of what the government should be doing, at least in a capitalistic society. maybe the dessert selection will be socialism?
I don't think there are many out there that didn't have money in the markets in one form or another, 401(k)s, IRAs, etc. With real estate prices already tanked, stocks and even bonds crashing (or about to), virtually everyone approaching retirement right now is facing a new reality. That reality is that they will be forced to work a lot longer than they expected. Those of us whom have more time on our hands, well, chances are you are freaking out about your losses right now, but you will recover in the long run, again based on history.
Don't think history repeats itself? Look again.
If we look back at the Great Depression, you can see we are pointed likely towards an even greater one. Why? Last time, our currency was based on gold. Now, it is merely paper currency and Bernanke has already stated that he will run the printing presses, debasing the dollar, creating inflation (even hyper-inflation if need be) in an effort to jumpstart the economy. Looking back to the Great Depression, FDR brought on the New Deals, a move that prolonged the depression, not fixing it as has been proven. Bernanke has scholared himself in the Great Depression, and I believe he thinks the New Deals were what brought the America out the other side, wrongful thinking, but also the same thoughts no doubt that Barack Obama and his congressional buddies have.
Since Bernanke knows that in a paper-based economy he can run the printing presses without limit, there literally is no end to the amount our government can, and will, spend. The end run, again based on history is that when the economy does finally return, and it will, we will realize exactly what the true cost of those government bailouts is, inflation, if not hyper-inflation, and don't expect the CPI (Consumer Price Index), PPI (producer Price Index), or even the PCE (Personal Consumption Expenditures Index) to show it, at least not until it is too late. In fact, we may already be seeing inflation reentering the picture, despite the recent data, at least based on the fact that money supply is climbing rapidly.
What does it all mean for mortgage rates, and even the real estate market? People will always need to buy homes, but with rising rates, they may not qualify for a large enough amount to sustain rising real estate prices. If this all unfolds as it may, we may very well see rising mortgage rates and real estate prices remaining steady for a long time, with no real appreciation since people will not be able to afford higher priced homes. Hopefully I am wrong, but it is a reality we may very well face and must be prepared for.