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Op-Ed: We need rate cuts to prop up unsustainable pricing

Here’s the deal – No rate cuts until prices are down and under control.

Global traders are in a bullish mood after the Federal Reserve's latest meeting
Global traders are in a bullish mood. — ©. GETTY IMAGES NORTH AMERICA/AFP CHRIS HONDROS
Global traders are in a bullish mood. — ©. GETTY IMAGES NORTH AMERICA/AFP CHRIS HONDROS

Low interest rates supposedly meant “affordable” million-dollar houses, and high prices for everything. The theory was that cheaper credit made everything affordable. The exact opposite happened.

The Millennials and Gen Z will be working stop-start gig jobs for decades in the face of an AI-dominated employment market. They’re going to buy mansions? They can barely afford rent and food. They can’t afford overpriced training and qualifications. They can’t afford health care or anything else, either.

I’m a Boomer. I went to school with these morons. They’re as dumb or dumber now as they were then, and they were always lousy at basic arithmetic. Everything the Mills and Gen Z have been saying about my useless generation is pretty right when it comes to managing anything.

The market is squeaking “rate cuts” as though that makes unsupportable rising prices and insolvency somehow nicer. Most people are in well over their heads financially. Rate cuts can do so much, and most of it is cosmetic.

Do you think your rent or the cost of essentials will go down due to a 0.25% cut in rates? Guess again.

In the Boomer years, property markets were as dull as dishwater but a lot safer. You could realistically expect to own a home, if not a palace, on a quite modest wage. You definitely didn’t have to expect to go broke in the process. Now, even if you have the money, you just wave to it as it goes into someone else’s pocket.

That was the peak growth era in history at the time in physical terms like numbers of people and actual economic growth. Most of the infrastructure you’re paying a fortune for now was entirely paid for by your grandparents. It only became ridiculously expensive due to privatization and deregulation.

Therefore:

Many people are living on interest-only mortgages. The myth of affordability is long gone in the real market. They don’t even get equity thanks to the ridiculous prices. It’s a very expensive form of rent. (At least it was, until the rent gouging mania. Now it’s pretty much the same.)

Health is unaffordable. That’s it. No explanations and no obligations. The health sector has been shedding people at an astonishing rate for some time.

Academic qualifications cost absurd amounts of money. It’s not what you know, it’s what you can pay for that qualifies you. Unqualified people get much lower wages and can’t afford anything anyway. Buying a degree is meaningless in terms of skills.

Food is expensive because the supply chain is a series of deals with middlemen.

Purchasing power for most people has effectively gone extinct.  

The Buy a Degree herd are in charge. Thus, we have a lot of people who can barely comprehend basic sentences setting prices. It’s the perfect mix of stupidity, greed, and incompetence.

…So, we need interest rate cuts? Why?

…Because insanity turns out to be very expensive. Cutting rates, however, won’t make it any less expensive. Just the interest on the insanity.

The credit market is about to self-destruct anyway, based on the hideous credit issues with commercial properties. Do you think credit will somehow just naturally become cheaper in a mad scramble for money to cover debts? That’s not at all likely.

You can’t have it both ways. You can’t make everything unaffordable and then expect not to have to pay for anything yourselves. You’re asking people to pay top dollar for anything and everything with money they’ll never have.

The capital base of the middle brackets is barely breathing. That’s quite an achievement, bearing in mind that it barely exists anymore. This price structuring is a house of toilet paper, not cards. Gravity is coming into play, and the structure can’t support itself. You have trillions of unstable and leveraged dollars balancing on a razor blade.

The amount of debt is staggering. The Silicon Valley Bank had a few stray billion in debt resting quietly on the books until someone noticed. Do you think that won’t happen again and again? The credit system is suicidal and taking most of the world with it.

Prices must come down and come down a lot.

The trash needs to be taken out.  

A lot of people think financial reform is “naïve”. The sub-primes meltdown showed otherwise. The finance sector is one of the great causes of human misery and deprivation. It causes poverty. It destroys jobs and quality of life.

Here’s the deal – No rate cuts until prices are down and under control. The alternative is crash and burn for the world economy. Take it or leave it.

____________________________________________________________

Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.

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Written By

Editor-at-Large based in Sydney, Australia.

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