A piece from Goldman Sachs economists Zach Pandl and Jan Hatzius: – Federal Reserve looks likely to begin raising short-term interest rates in December – Based on our economic forecasts, we currently expect the FOMC to raise the funds rate by 100bp next year:
- Federal Reserve looks likely to begin raising short-term interest rates in December
- Based on our economic forecasts, we currently expect the FOMC to raise the funds rate by 100bp next year
- One hike per quarter
- We see the risks to this forecasts as skewed to the downside at the moment
For economic growth in 2016:
- US economy likely to be driven by domestic demand … in particular consumer spending
- Forecast GDP will increase by 2.25% Q4/Q4 next year
- Narrow and broad measures of unemployment have fallen significantly
Source: Goldman Sachs chief economist expects 100bp of Fed rate hikes in coming year
Based on this forecast by major economists, how do you see it affecting the real estate market? Significantly? Slightly? Not at all?
By Charles Hugh Smith
Of Two Minds
The global economy is now addicted to debt. Once debt stops expanding, the economy shrivels. But expanding debt forever is unsustainable. Welcome to the endgame.
Regardless of whether you call it debt saturation or diminishing return on new debt, the notion that taking on more debt will magically enable us to “grow our way out of debt” is not supported by data.
Correspondent David P. recently shared this chart of Total Credit Market Debt Owed and GDP and this explanation:
The purpose of this chart is to examine the relationship of total debt to GDP. Since Debt is not factored into GDP, just exactly how much debt is being used to create growth, and over what time periods. But absolute numbers don’t work so well, since they don’t let you examine particular years, seeing what the 1950s look like vs the 2000s, for example.
Red Line: Annual Change in TCMDO (Total Credit Market Debt Owed) * 100/ That year’s total GDP, showing that year’s % increase in TCMDO/GDP.
Blue line: % change in GDP over last year.
Any gap between the red line and the blue line is what I would call the creation of debt in excess of income. And that gap is the ANNUAL gap, not a cumulative gap. As an example, in 2008 TCMDO grew by an average of 30% of that year’s GDP, while GDP itself grew by around 5%. Ouch.
Continue reading “Why The Debt-Dependent Status Quo Is Doomed in One Chart”