So isn’t rent and property value pretty much following the same trends? I’m seeing about +8-10% in home valuation in the two markets I’m familiar with (home + vacation home) compared to a year ago. In itself, that’s strong growth for a single year but still only about half of the 17% OER quoted.
So are rents increasing much faster than home values? Or is it just regional fluctuations?
That spiral will end when the dollar loses reserve currency status.
“How did you go bankrupt?"
Two ways. Gradually, then suddenly.”
― Ernest Hemingway, The Sun Also Rises
Assuming we don’t default first.
A sovereign nation cannot default because they will just print more money to pay their debt. The problem is when other nations will not accept their money.
Legally there’s a limit as to how much we can print. If one of these days Congress doesnt keep raising that limit… Sure, it’d be a default of our own doing, but still a default.
IMHO this is one of the possibilities that will never happen. Besides even if the debt limit is not raised for a short while, the treasury can just use whatever funds they have to pay the debt and default on things like Social Security and paying the military.
Yeah. Congress would have to authorize said printing of money in the first place. Default can happen when the government is either unable or unwilling to keep paying its debt.
The temporary measures to avoid straight defaulting may actually help with inflation since they’d likely involve the government no longer paying things like SS, shutting down some of its services, and not paying employees. But I’m not sure that’d go down that well… Especially since that debacle would likely lower the rating of the US and increase interest repayment required. And that’d surely would increase inflation even faster. So it may not be that slow a spiral of gradually borrowing more if the incompetents at the helm carry on as they have the last few months.
But since Congress agreed to kick the can until 2023, maybe it’ll be a different set of incompetents in power by then… 
Interesting data
Edit. The graph below does not capture the inflation in December 2021, which as you know is nearly 7%
Notice the relatively low inflation in the Euro area
The fed’s bond buying cannot keep all interest rates down
Where I’m watching it is regional. In one (more affordable) region both values and rents are up 30%, in another (less affordable) values are up 20% but rents are only up 5%. Those are very rough and maybe slightly exaggerated numbers (to protect the innocent 
). One explanation is that more people are moving to the more affordable areas (or more are moving out of the less affordable ones than out of the more affordable ones).
That’s one trend I was suspecting due to the pandemic and WFH decreasing the location premium for high cost areas.
We’ll see if that trend continues after the pandemic is over.
The FOMC is meeting today and tomorrow. They need to raise interest rates to have a chance at cooling inflation. And their other (nominal) objective, support of employment, is in pretty good shape, leaving room for the former. However:
Let’s get real. The Fed’s actual, but unacknowledged formally, objective is support of our bloated stock market. Interest rates rise, the (stock) market falls, and the Fed will have a conniption fit. So I’m not counting on a serious Fed battle against inflation.
Paul Volcker is, sadly, dead. Chairman Volcker knew how to extinguish inflation a LOT worse than what is out there today. Powell does not qualify to carry Volcker’s jock strap.
For a bond investor inflation is essentially the same thing as a default.
If you have a $1 treasury and they repay you 90 cents on the dollar… it is exactly the same as them printing a bunch of money, the dollar losing 10% of its value, and then paying you the full dollar.
Either way, your purchasing power is going down 10%, the loss is real, and you are buying less stuff.
Or perhaps more specifically, unexpected inflation is equivalent to that, to the amount of its level that occurs during the bond’s duration, since presumably expected inflation for the bond’s duration was already priced into the coupon when issued or price when purchased.
Wholesale prices increased at their quickest pace on record in November in the latest sign that the inflation pressures bedeviling the economy are still present, the Labor Department reported Tuesday.
The producer price index for final demand increased 9.6% over the previous 12 months after rising another 0.8% in November.
Excluding food, energy and trade services prices rose 0.7% for the month, putting core PPI at 6.9%, also the largest gain on record.
I think that the fed’s quantitative easing purchases throw all efficient market arguments out the window. There is no way that the 10 year note interest would be 1.4% without their purchases.
Temporarily. The yield curve will invert, just later than it would without QE∞. They can’t stop it, but they can delay it for a ? period of time.
Where I’m watching it is also regional. More affordable regions are becoming less affordable. Less affordable regions are becoming even less affordable.
A couple of acquaintances involved in the rental market are increasing rents by significant (to me) amounts in the 30% range. One was slightly below average pre-pandemic. He was unable to raise rents during Covid … can’t recall why, but he’s making up for it now, and kicking out defaulters as fast as possible. His default units are >18%, which is very high for him.
The other has a few hundred units in two complexes. He has almost no units in default and none in the process of eviction. His units are, generally, higher quality, and in safer areas. He has no “month to month” leases. You either sign a one year lease, or move. None of his lessees are in default, but he’s raising rents by 24% (on average) as leases renew. For the last 8 months he has not lost a renewal.
Both of the above owners are looking to sell their complexes in the next year, and thus looking to make their numbers as attractive as possible.
yeah, you think?
Chair Jerome Powell on Wednesday said the U.S. economy is improving quickly and no longer needs the “increasing support” provided by its asset purchases, making it appropriate to conclude that program earlier than previously projected.
Powell’s comments at a press conference came after the central bank doubled the pace of its bond purchase “taper” at its latest policy meeting that concluded on Wednesday.
Edit. here are the actual numbers
Central bank officials had been purchasing $120 billion in Treasury bonds and mortgage-backed securities throughout most of the pandemic
The U.S. central bank will lower its monthly purchase of long-term Treasury bonds by $20 billion a month and monthly purchase of mortgage-backed securities by $10 billion a month, bringing the total January purchase to $60 billion.
Here’s one endpoint for that strategy
Another day, another collapse in the Turkish lira, only this time there was a twist: as the hyperinflating currency implodes, Erdogan has finally had enough of the relentless pummeling, and is starting to shut down Turkey’s markets.
But first, let’s back up: heading into Friday, the lira accelerated its historic descent, weakening past the 16 per-dollar mark for the first time ever, as the central bank’s pledge to end a four-month cycle of interest rate cuts on Thursday failed to convince investors that inflation can be brought to heel. That was just the start however, and the currency plunge only accelerated crashing as low as 17.14 just hours later, bringing declines this week to 17%. YTD the currency has lost more than half of its value!
I’d hate to be a regular Joe in Turkey, working my entire life and having kept most of my money in the local currency.