patrick.net

Jack when I asked my favorite Professor, who taught metallurgy, and was just a really really great guy, how he would like to go, his response was classic "give me 10 more good years and then shot to death by a jealous husband", no offensive intended man! There are good boomers (Jack) and bad ones (all the remaining 71.8 mil). I kid I kid.

I think if I am forced to hear another Seals & Croft, America, Bread or Led Zep song I am going to slash my wrists with my teeth. Why must it go on and on and on?

Jack, sorry man, just trying to schedule a multi-variate vacation node in Edinburgh. Randy H. any models to find the best cost/pub distance/pimp factor in Edinburgh?

I'll send you out a proposal, including my hourly rate, lol. Perhaps I can freeload off your node down in Mougins.

I think if I am forced to hear another Seals & Croft, America, Bread or Led Zep song I am going to slash my wrists with my teeth. Why must it go on and on and on?

Someday they'll being saying that about our Cure, Depeche Mode and New Order. Wait! They already are?!? Well shit man, us Xers are old too I guess.

Desirenter, good move, I probably want to trade up when the interest cycle peaks too.

How high do you guys think the interest rate will go? I am thinking about something between 10-15%, perhaps even higher. Am I cuckoo?

How high do you guys think the interest rate will go? I am thinking about something between 10-15%, perhaps even higher. Am I cuckoo?

I doubt mortgage rate will go higher than 10%. I do not really buy the inflation story.

I doubt mortgage rate will go higher than 10%. I do not really buy the inflation story.

There would have been some pretty good inflation to hit nominal mortgage rates of 10%, lol.

but the 10% nominal rate is not only compensating for inflation, it may be needed to compensate for the extra currency risk that foreign investors require to invest in US assets. I believe the domestic inflation probably won't go above 10%, but adjusted for currency risk?

My understanding is, inflation has two components: stuff that we produce locally, stuff that we import. For stuff we produce locally, e.g. food, houses, etc. we are seeing some kind of inflation, let's say, 10% a year for simplicity's sake. For stuff we are importing, e.g. energy, cars, etc., shouldn't those foreigners force us to pay more for their goods because they are afraid that our money may not be worth as much as it does today, apart from compensating for their inflationary expectations?

If the Eurozone is having 2% interest rate, and we are having 10% interest rate, won't part of the differential be what I portray as the "currency risk"? After all, commodities like metals, gas, energy, food are "globalized" so whatever inflation we are facing should be faced there as well. The only difference in inflationary force between the dollar zone and euro zone should be stuff that cannot be outsourced or imported, like education, housing, medical service, etc. So after the housing bubble bursts here in the US, unless education and medical service suddenly decide to become the next bubble (I don't know how), why should there be much difference in inflation between europe and us in such a globalized economy where goods flow freely?

In the short term, interest rate differential will have a bigger impact than trade balance or national debt in affecting the currency strength. I am just not sure if this is sustainable in the long term. And if our interest rate shoots up, I believe part of it is already factored in as a compensation for "currency risk".

So, that is why I believe our interest rate will be higher than 10% if we need to account for the devaluation of the dollar.

If the Eurozone is having 2% interest rate, and we are having 10% interest rate, won’t part of the differential be what I portray as the “currency risk”?

There isn't that much of a currency risk component to the USD. H.Z. is dead on, as I understand it. Interest rates are governed by covered-interest-rate-parity (CIRP), which pretty much holds over the long term. But real goods exchange rates will change purchase-power-parity (PPP) over the shorter term.

Also, keep in mind that the US is the country *least* sensitive to interest rates in the rest of the world (ROW). Most other countries cannot change their nominal rate without an automatic adjustment in the real rate and inflation, because they are real-rate takers, not setters. The EU does have some nominal rate power, but nothing near the power the US has. Simply, we can buffer inflation by encouraging or discouraging capital inflows via nominal rates.

I mean, most of our jets and military systems are made in China or Singapore, and who knows what weird stuff is put into our weapons.

Not even remotely true. The US manufactures one thing very very well, weapons.