FinGurú - Paying the party by horacio gustavo ammaturo

As with most of the world's central banks, the Federal Reserve has as its main objective to keep the US economy operating with the highest efficiency, arbitrating the axis in the balance that must be between full well-paid employment and inflation.In summary, monetary policy seeks to maintain the purchasing power of money and to retain the value of people's income, particularly employees.To meet this goal, the EDF has some tools. On one hand:

The interest rate offered by his obligations, which is assigned to him to the traders and investors to deliver their dollars in exchange for letters with the expectation of getting more dollars in the future. In doing so, the Central Bank influences the interest rates charged by the banks when they lend to their clients, both corporate and residential. For example, increasing the rate of federal funds would lead to higher mortgage rates and higher monthly payments, which in turn should cause a drop in property demand, which would lead to lower or stabilized prices.
Another way to increase interest rates is to resort to a process called quantitative adjustment (QT). This process is also known as the balance sheet normalization. In other words, the Federal Reserve reduces your monetary reserves by selling Treasury bonds or letting them win and eliminating them from their money balances. This eliminates liquidity or money from financial markets.

The main objective is to reduce the amount of money in circulation to contain the growing inflationary forces.Given that the offer would continue to increase through additional sales or lack of government demand, potential buyers of bonds would require higher income to buy these offers. These higher yields would raise the indebtedness costs for consumers, which would make them more cautious at the time of debt. This must contain the demand for assets (goods and services).Less demand means stabilization or price reduction and inflation control, at least in theory.However, the result that is intended to avoid, which is the loss of the purchasing power of the salary ends up occurring equally, either by the inflationary effect as by the suba of fees, consumers allocate more resources to buy products of first need and to pay larger financial expenses.It is shown that during inflationary processes the main beneficiaries are the suppliers of mass consumption products, food, hygiene, cleaning or any good or service that most people are required to consume. This circumstance allows your prices to be anticipated for the rest and even obtainedA distributive improvement, obtaining greater participation in the destinations of the revenues of those who have less.However, when measures aimed at attenuating the price rise in inflation processes are based on the interest rate suba another sector enters into the distribution proposal, the financial one.Whether it is for the exercise of dominant positions of concentrated producers or for the upstream of the interest rate affecting all areas, any solution to the inflationary question proposes greater concentration of wealth and lower distribution of income. The central banks can only decide whether the cake goes all the way to the large base product companies or goes under the banking and financial system to the train of the few who escape poverty.The measures taken by the Federal Reserve, in appearance with exclusive implications for financial markets, will have effects on the real economy.However, in the U.S. case, the gap between interest rate and inflation shows that still with the consecutive 75-point base subas are far from becoming positive. At this rate it would take 6 years of permanent adjustment at each meeting for the rate to reach inflation.

Still, for the purposes of maintaining the purchasing power of the dollar, the Federal Reserve should lower inflation.Knowers of the tools used in these latitudes, which serve little, like price control, to influence the offer, only you have to resort to manipulating the demand via the impoverishment of consumers.

Where will the first impact be seen?

The US real estate market has been abolished since 2017 when interest rates have been postponed to inflation and people's incomes have grown beyond financial costs. As a result, with the same quota, real estate buyers could buy more expensive properties.Property demand has increased throughout the country and property prices have risen exponentially. All supported by the extremely low financial cost that boosted the price of the properties, back feeding A virtuous cycle in which, at the cost of money, the price of real estate continued to rise.Clearly, the rise in the mortgage financial cost implies an adjustment in the price of the property, as the buyer has limits in the value of the quota that can pay.The Federal National Mortgage Association (FNMA) (in Spanish: Associação Federal Nacional Hipotecaria), commonly known as Fannie Mae is an American government-sponsored company whose purpose is to expand the secondary mortgage market by securitizing contracts in the form of bonds with real support. In this way, small investors can participate in the mortgage business, entering and leaving the settings without having to wait for the borrowings.This organization issues an index on the “shopping feeling” of people for real estate. The higher, the better.

Buying Expectation Indicator (Business)

As you see this indicator is at the lowest levels since 2011.Meanwhile, the FED soaks up to where it can tighten with the suba of fees playing in a subtle balance between inflation and bubble explosion.Inflation is the invoice that always comes after the monetary party.Luck is lost. The inflationary process began and the orthodox measures were implemented.It is only necessary to wait if the fees that will happen will be important enough to impoverish the citizen without exploiting the system.Extremely difficult game, make me with an electoral year so close.

9/13/2022 - economy-and-finance

Paying the party

Where will the first impact be seen?

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