How High Interest Rates Upended the Economy
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- Опубликовано: 27 фев 2024
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The Fed has been raising interest rates to cool inflation. While that seems to be working, there are a lot of side effects that can hit you right in the pocketbook!
Two Cents is hosted by Philip Olson, CFP® and Julia Lorenz-Olson, AFC®
Directors: Katie Graham & Andrew Matthews
Written by: Julia Lorenz-Olson, AFC®
Executive Producer: Amanda Fox
Produced by: Katie Graham
Edited & Animated by: Dano Johnson
Fact checker: Yvonne McGreevy
Executive in Charge for PBS: Maribel Lopez
Director of Programming for PBS: Gabrielle Ewing
Assistant Director of Programming for PBS: John Campbell
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Two Cents is a production of Spotzen for PBS Digital Studios
sources:
www.federalreservehistory.org...
www.thebalancemoney.com/u-s-i...
www.cnbc.com/2023/07/26/low-f...
www.nytimes.com/2023/03/16/bu...
www.imf.org/en/Blogs/Articles...
www.minneapolisfed.org/articl...
www.thezebra.com/resources/re...
www.kiplinger.com/business/sm...
www.usbank.com/investing/fina...
www.forbes.com/advisor/mortga...
www.nerdwallet.com/article/fi...
www.forbes.com/advisor/mortga...
www.nytimes.com/2024/01/01/bu...
www.cnbc.com/select/best-high...
"While borrowing money has become more expensive, having money has become far more profitable." And so it goes.
So get a job and get some money.
@penultimateh766 Former Australian treasurer Joe Hockey told struggling young people (who can't afford a house) to get a good job that pays good money.
He also said that the poorest people either don't have cars or don't drive very far.
I'm not making this up.
@@dragonite87 Why should young people have a house? I rented until 35.
While that is partially correct, it isn't actually correct. Most people have their net worth tied up in assets, and many people misunderstand the difference between net worth and money when looking at others. Higher interest rates benefit wealth distribution because it makes assets more attainable in the long-term.
@@penultimateh766 bc we want young people to have kids. No one but degenerates are going to breed while renting out a small flat with constant risk of your landlord doubling the price to pay off his own mortgage.
It's almost like this "good" economy only benefits the people who were already wealthy and screwed over anyone who actually at risk. I think it's LONG past time we stopped only looking at raw metrics and instead looked at how everyday people are affected
Love your videos. PBS for Adults but the way I felt when I was a kid.
The economic landscape wasn’t as dramatic of a change as when mustache man Phil turned into Mr.Brightside
🎸
I miss his mustache lol.
2007 I bought my home at the peak of the market at a high interest rate, then the crash, then a HARP refinance. For over a decade I somehow made it work. Then, interest rates get below 3% and I refinance. It's friggin crazy I'm finally feeling like my home was worth over a decade of stress.
At least you have a house. Young people can’t afford housing without nepo benefits
The home buying sideline is huge. It will be interesting to see what happens to already high home prices when the rates drop a couple percent.
The fact that you use the word “interesting” reveals that you already have a home.
Those of us in our 20s might use “terrifying”.
@@AK-jt9gxlol living in a war zone is terrifying get some perspective 😂😂😂
@@KN-cool I agree that I used an overly strong word. It was hyperbole. But “interesting” certainly doesn’t cover it. There *is* an element of serious fear regarding having to live “on the edge” financially for multiple decades of our lives due to this housing crisis. You want to critique my word choice, fine. But don’t get to tell us it’s not unfair and scary that because of older generations’ greed, we’re going to live in the hardest generation ever to find housing while we’re taxed to pay for their end-of-life care.
@@AK-jt9gx i didnt say it wasn't unfair
I'm still in the glass half empty side because a lot of the world is actually going through quite the crisis right now. It just so happens that USA's spending addiction is prolonging the issue of their finances and actually not coming up with plans on addressing the issue outright or at least start to pay off its own accumulated debt is making the issue bigger and when it strikes it would have massive implications. Just imagine if a citizen asked to prolong their current debt levels forever even when they're dead as the banks would laugh at you for that proposition but when any government does it the institutions lending the money or form the contract bat an eye and sign blindly.
I'm also extremely annoyed at the disconnect at the stock market with the actual economy right now and argue they should be a reflection of each other and not be separate entities. This proves that the stock market isn't efficient at all and leverages trends and biases to keep inflating the bidding price of the stock price of certain assets and we're seeing how artificially this is done with leveraged option products. I will always mention that the government can fix this by creating standards on how money is created and what each unit should equate to with some unit of effort. But nope we continue to live through the subjective judgement of how rich people deserve their wealth and because of relaxed regulations without standards as long as you have a lot of money you can go "Rules for me and not for thee" basically.
I 100% agree but remember the saying "the market will remain irrational longer than you can remain solvent"
Spot on about America's spending addiction, we should have checked into the Betty Ford clinic for this habit a long time ago. Our modern "instant gratification" lifestyle, relentless ads/marketing urging us to spend, spend, spend, and services like Amazon, Temu etc. aren't exactly helping, either
I like the Hannah Barbera sound effects.
I mean, just look up historic mortgage rates, over the past 50 years or so, and you'll quickly find that the rates of the last decade or so were abnormally low. It kind of reminds me of how I would see people post photos showing gas prices on the same day in 2020 and 2021 and imply that gas prices were low under Trump and skyrocketed under Biden, but they failed to consider that the low 2020 price was overwhelmingly due to low demand from the pandemic and a massive surge in supply from Saudi Arabia during its price war with Russia.
Mortgage rates in the 1990s (supposedly the decade of greatest economic expansion in US history) were upwards of 8%, and towards the start of the decade were trending closer to 10%. My student loans were 8%. People forget that stuff relatively quickly.
@@scarpfish It's natural to "forget" when you were a kid during those times. That's why financial education is key in high school. I'm very surprised it isn't a core subject that Juniors or Seniors have to take. I mean even at least one semester of it would do loads of good to students who might otherwise dig themselves in a hole that they spend the rest of their middle age trying to crawl out of.
@scarpfish Yeah but prices were cheap in the 1990's. Gas was like 1.25. Minimum wage was 3.35. My first place 1 bedroom was 225. Car insurance was 25 a month. McDonald's was like 4.00. Nobody in 90's knew what inflation was. Now you can't make enough because information from technology has enabled people to manipulate things so quickly that the cycles are shorter now. Cycles being people's ability to "keep up with normal wages and their purchasing power." Back in 90's you could work 2 jobs and be considered 3 times richer than a normal person. Now a person has to work 4 forty hour jobs to just stay in a rental place with a old used car with no hope in site. I don't see things getting better due to how the age of technology has really screwed up things due to lightening fast transfer of information. I remember reading how computers do millions of stock trades per second to manipulate the stock market. Well that's just 1 example of "forgotten manipulation." But you get my point. Crime against humanity has become normal and people don't even realize it. Government is completely ignoring it.
@@nowthatsfunny1 A person can't possibly work four 40-hour jobs; there are only 168 hours in a week.
The workers know
Great video! I appreciate what you guys do 😊
Nice video!! Keep up the good work ✌🏻
Thank you PBS and 2cents.
Adults need simple financial and economical explanations. I love these short form videos with big information.
awesome job, super informative.
thank you for the video! i was waiting for this one
The overheating of the economy was in fact due to monopolization of industrial sectors.
The best way to stop this is to stop unfettered mergers. But that’s fiscal policy and legislation, which has stalled in the usa
Really well researched and concise video. Currently in the process of looking for a home in the Netherlands. Prices dropped with the interest rate hike but are rising back now. Exciting!
It's true. Price at Bob's Shop has gone up quit a bit.
Great stuff! Thank you!
Great Video! Keep up the great work!
So glad I paid off all my debt last year and now I got a free road ahead. I feel like I dodged a CC debt bullet and I agree putting my cash in a high yield savings was a very smart move. I've made so much money off it I don't keep my savings at my local bank anymore. Just my spending and some bills and maybe saving up for a smallish purchase.
So you're one of those evil rich people who are hoarding wealth and speculating off the rightful property of the masses.
Being in WA, 70 in the summer is still warm! We try and not go below 65 on the AC, but it's hard
5:19 When land and dealing with "broken" zoning laws is the most expensive part of the gig, it's no wonder real estate folks would rather deal with existing homes that can be renovated for a flip rather than building a new house entirely.
This is why no new homes will ever be built: the polimaticians that own multiple properties hate to see the value of their own real estate portfolio go down just for the sake of doing their jobs by making new homes.
Quick question about paying credit card debt.
Let's say I have 5000$ debt on my credit card.
My salary this week is 1000 dollars.
Is it better to put the full 1000 dollars on the credit card ASAP. Or wait till the end of the month and pay what's left in my account.
I figure I should wait because of the extra interest on cash advances.
Or pay sooner so the interests don't run for the whole month.
This is a complicated question for me! I'm not that smart!
1:31. Phil's "look at this graph moment"
The transformation for dude in accounting to John Frusciante is my favorite part of these videos
Thankyou for addressing the housing shortage but you never show how big of a problem it really is. COVID is nothing compared to the real estate crisis we've been dealing with the past 30 years. And clearly from your own video it's not high interest rates that upended the economy, but that high interest rates were a safeguard against an already upended economy.
3.2% still means prices are going up on top of already crazy price increases after covid. How are people actually expected to buy in the past rates when things are more than twice as expensive as they used to be?
I’d be retiring/working much less in 5 years and curious to know best how people split their pay, how much of it goes into savings, spendings or investments. I earn around $250k per year, but nothing to show for it yet.
various schools of thought are out there but I think you should consider financial advisory, never can tell what the future holds
Agreed, I'm quite lucky exposed to personal finance at an early age, started full time job 19, bought first home 28, got laid-off work 36 amid covid-outbreak, and at once consulted an advisor. As of today, I'm only 25% short of my $1m goal after subsequent investments.
bravo! i am 36, inherited money from a childless relative, traveled overseas, and got married to a lady almost my age, but the only issue is how to preserve and grow my wealth in this shaky economy, can your advisor be of help please?
I take guidance from 'Karen Lynne Chess' a renowned figure in her industry with over two decades of experience. I'd suggest you research her further on the web.
really glad to see this, just googled Karen Lynne Chess and was able to spot her consulting page, incredible profile! thanks for sharing..
The folks who are at lowest of end income are the ones hurting the most.
❤ taking advantage of the high yield savings account 🎉
Indeed! I'm throwing money into a Money Market fund that was at 5.5% the last I checked. Whereas my bank's savings account is *_still_* at 0.07% 🙄
Short term treasury bonds are 🔥🔥🔥 too. No state and local income taxes on profit as well.
You guys are lucky in America, here max they offered was 3,5% and took a long time for them to star offering that now is at 3% , some offers more but is for 3 months period or signing for a new/small bank bonus , my government helped banks by lowering interest rates on government bonds
Hey nice video, however I believe it can be misleading. The current target of the FED is 2% which will not be able to achieved if interest rates go down. I believe a more complete picture will be to check on history and look at how long it took to get to a turning point instead of saying in 2024 interest rate may go down.
Don't leave out the fact that half of the inflation is due to corporate greed.
You couldn't even be bothered to mention that housing is hard to buy because corporations and banks are buying them up with cash offers?
Last time I checked C wasn’t something that controlled our economy lol. It’s ok I get it. Don’t blame the people in charge. Just assume it was one of those things.
4:00 small in terms of number or small in terms of total market share lol, obviously there's only a couple that dominate the whole thing
Let's goooooooo!
Rates are not going to be cut. They can try but it won't be good.
It's interesting that we don't hear about greedflation.
Want to talk about? What all have you seen in your personal life that was marked up super high to be greedy? For me, I remember shopping at Kroger one week and thinking "Wow, things aren't that expensive here, I think I'll shop here instead of Walmart from now on". And then the next time I went there prices were 60% more. I went back to not shopping there.
……If “inflation” dropped back from 9 to 3 it sure does not feel like it did
That's because they told you "relative inflation" we aren't at 3% inflation we're at 3% *more* inflation than we did last year. So the prices are going up, just not as fast.
@@TiberiusX disagree. Prices 100% went up faster.
Credit Cards: maxed out
Money in the bank: cashed out
Mental health: crashed out
I dont buy much. Foods are raising but not salary.
Apparently all the cost of living corps didn't get the message inflation dropped. Super convenient for them huh
Cries in Millennial while watching this video ..
Typically, the best time to buy anything is during a recession... if you can truly afford to. 🤷♂
Thanks for this. Ran out and swept my cash into CD’s. Rates are good for short terms, 3-7 months, and are already falling.
Interest rates aren’t high, it’s historically normal and still lower than the 70s 80s 90s and 2000s. And we are crying about interest rate but refuse to look at the prices???
Exactly..under president Reagan I bought my first house at 18% and 30% capital gains tax..It's just the way it was. With Bush I bought a condo with good down payment and paid 7 3/4% then the real estate market crashed..Both Republicans..just saying
@@davidtrask410 you bought a house at a high interest rate but the houses were in those times were actually affordable. Rn it's like if were paint 400% interest rate
Money shouldn’t be free. We should never go back to ZIRP
If you got paid the 5 silver quarters of minimum wage in 1964 it would be 26 dollars an hour
Higher interest rate is now the reason of high inflation. What we are hearing is that high interest is high borrowing cost so that they passed down that cost to the customer. Rent goes up because borrowing cost is high. Rent goes up because less people qualify to buy house, so more competition in the renting market. Also, less buyers qualify on new housing means less new construction. Construction is now on halt. Less supply, higher price.
For the richer, high interest equals more free money. Put money on saving account is more free money to spend.
For now, high interest rates causing high inflation
The rich prefer lower interest rates to juice their asset prices. That's where they make their money not in their savings accounts lmao
@@DMAN590 during high interest stage, you can move your stock assets into liquidity. Then move them back to stock when interest go down. Easy money.
TLDR: everybody is making money except you.
Can't beat 'em? _Join 'em._ 😈📈
Higher interest rates, concerns about a possible recession and instability in the banking system have plagued smaller stocks. I'm still at a crossroads deciding if to invest $400k on my stock portfolio. what’s the best way to take advantage of the market?
If you're not who understands strategies to invest in the market, seek a Financial advisor to guide you.
I completely agree. I have been consistent with my profit regardless of the market conditions. I got into the market early in 2019 and the constant downtrends and losses discouraged me, so I sold off. I got back in December 2020 and this time with guidance from an investment adviser who was recommended by a colleague
That's impressive! I could really use the expertise of this advsors.
This video is light on a lot of content. Homes for example, look at corporate buyers who are keeping things artificially scarce. The fact that exotics and basic banking should be separate. There is so much this halfway done video leaves out.
Nothing to do but raise interest rates. God forbid we make anti-price-gouging laws.
"As a result of many complicated factors, prices as a whole started to rise"
The federal government more printed money. That's the ultimate reason. More money chasing the same amount of goods. Inflation.
Yes, let's ignore the two wars that broke out
But when are we going back to normal? lol
Federal minimums were suspended from Covid to now. That also push more lending along with unlocking everyone’s retirement savings that could pull out for free to buy houses too.
0:33 "the government raised interest rates" - that's not accurate. The Federal Reserve is not "the government". This is not some sort of conspiracy mongering on my part, but I am perhaps being pedantic. Neither the Executive branch or Congress raised interest rates. Indeed, the last thing a government wants to have to do is pay higher interest on their debt. The Fed has somewhat of a quasi-government nature, but that is far from being the actual government of the US.
I didn't know the federal reserve was a private entity. Did they win a contract to be able to act in the government's name? That seems like a pretty important omission on the part of this video.
The Federal Reserve is managed by the executive branch and authorized / created by the legislative branch, so I'd say (correctly) that it is part of the Federal government...
5:52 The phase is "champing at the bit" not chomping.
*phrase
I appreciate your content. With that being said the information you provide is the same as almost all other financial videos. I am coming to the realization that the system is set up to hold the poor down. You ever so casually talk about how hard times, decreased sales, high interest, ect. ext. like these are just expected bumps in the road. When the reality is that these are real people, with real lives, dealing with all those stresses. These are the same people who are trying to be good people but the system keeps telling them they are not enough. The stock market is not for everyone. The general population as a whole does not have the knowledge to operate in that environment. Yet the rich who do operate there want us take our tiny money and throw it at them with a pipe dream promise that it will magically make us stable. All we have to do is not have a life for 20 years.
Bitcoin is on its way to breaking records, getting closer to hitting new high prices, showing that it's gaining more value and could go even higher than we've seen before. This could mean great things for people looking to invest, suggesting now might be a good time to get involved before it jumps even higher. It's an exciting moment that could change the game in general...managed to grow a nest egg of around 2.3Bitcoin to a decent 27Bitcoin....At the heart of this evolution is Linda Wilburn, whose deep understanding of both cryptocurrency and traditional trading has been instrumental. Her holistic approach to investment and commitment to staying abreast of market trends make her an invaluable ally in navigating this new era in cryptocurrency investment.
She's often interacts on Telegrams, using the user-name.
@Lindawilburn
The same high-yield potential exists in both bullish and bearish situations; what matters is how information and technique are used. Not neglecting professional advice.
I was big on gold and silver but a few months ago I discovered Bitcoin and Ethereum . Listening to lots of stuff from Wilburn has been really helpful in my journey.
The fact that i got to learn and earn from her program is everything to me think about it, it's a win win for both ways.
In more rural and the rest areas I honestly believe the higher interest rates have been better for first-time home buyers and people without a lot of money. A 6-8% spike in mortgage rates really hurts when you're buying a $450k house, but the effect is neighborhood on a $50k loan. Granted they're also aren't a lot of startups and new small to medium-sized employers in these areas, so they haven't felt as much of an impact on the employment market.
champing at the bit
People thought the world was ending in 2012 and we are still here. k So chill.
Saddest video 😢
The guy looks ao much younger qothout the 70s mustache and long hair. Even younger than the woman
Damn, does anyone make "Too Long Don't Watch" version of these? I feel like all of two cents videos have gotten so boring over the last bit 😭
Im planning to finance a used car but since interest rate is still high invluding car prices ill just sit back and wait until im comfortable to buy again
Software companies which will never be profitable i.e. Zombie companies, loved near zero interest rates because they didn't need to actually be profitable. Higher rates are better for wealth distribution, and for the long-term economy.
The Fed needs an audit.
The Fed needs to end
Nah billionaires and fortune 500 companies need to be better audited than the morons at the Big 4. I was one of them, SOX audits are BS.
@@MBarberfan4lifeBefore the Fed, banks failed multiple times a year and ordinary people lost their cash savings.
5:53 *champing at the bit
❤
Raspacious corporations = greedflation
WE NEED SOCIAL HOUSING NOW!!!
With high interest rates and housing being so expensive, home ownership is getting further out of reach. No matter much I got a raise or switched jobs to make more, it keeps getting higher and higher. Maybe I should retire early at 29 with a 9mm plan.
Only quitters quit.
Yo, for real. Like I’m actually being serious. You should maybe see a counsellor. If you can’t afford one, you should check around for any free/ charitable services ❤
You can rent rather than "calling it quits".
Might be a slightly less dramatic solution...
Winners are losers who win. Start winning.
@@dipdip7250 that's bs talk. Might as well be saying that people should just all be above average.
Enjoy watching us poors, us marginalized, isolated LGBT+, redlined bipoc, disabled etc people wither away while you just keep saying "well! Spending is robust! And wages went up 3 whooooole bucks!".
cute as usual : )
Young people need a chance at life
It is so cute that you think that residents own homes. Sorry. Investors and landlords do primarily. They do not have to move when selling because they never lived there.
The residents who own their homes are old people who just live in theirs.
The next housing crash will probably be worse than 2008.
We need another Andrew Jackson in office.
For what exactly?
@scarpfish dismantled the central bank ie the Federal Reserve and restored constitutional money as he did during his presidency .
@@scarpfish To dismantle the central bank ie the Federal Reserve and establish constitutional money again like he did.
@@alaingarcia4756 HARD PASS.
@@alaingarcia4756 Andrew was the last president to pay off all debt, but no way he’ll make it into office in todays world. Most people want these idiot politicians that hand them free stuff.
Wat happened to these 2 people ..
First things first, bring back the ‘tache!
First 🎉
Many PBS digital shows are pretty high quality, and this channel is often fairly good. But this video seems like it's trying too hard to tell young people that things are just ok. Yes, we've had much worse inflation in the past, and yes we've had much worse unemployment in the past. But we have some very troubling global issues currently and these will play out in chaotic ways in the next few years, and young people will have to adjust to living with less.
This is called gaslighting
JUSTICE FOR PHILLIPS MUSTACHE
Pointless video means nothing to hungry homeless people xD bunch of words that also mean nothing to cheaters that already own us like slaves
Until we go back to the gold standard we'll keep having problems
Crypto
CUT YOUR HAIR DUDE!
Although the rising interest rate will undoubtedly curb inflation, it will not stop the US dollar's declining purchasing power. This time, I've learned my lesson. My money is being eaten away by inflation, so the banks cannot be making money off of it. Since investing in the stock market keeps up with inflation, I have set aside $750k to do so, but I have no idea where to begin.
I completely understand your concerns. But In this current unstable markets, It is advisable to diversify while retaining 70-80% in secure investments. looking at your budget, you should consider financial advisory services.
I agree. This is why having the right plan is invaluable, my $520k portfolio is well-matched for every season of the market and recently hit 100% rise from early last year. I and my CFP are working on a more figures ballpark goal this 2024
I’ve been down a ton, I’m only holding on so I can recoup, I really need help, who is this investment-adviser that guides you
@@kemberlyw.patterson*Obviously talking about successful investment, I know I am blessed if not I wouldn't have met someone who is as spectacular as mrs ava Kimberly*
*Obviously talking about successful investment, I know I am blessed if not I wouldn't have met someone who is as spectacular as mrs ava Kimberly*
Rates kept artificially low. Stop whining.
Man, I'm sure happy I'm just broke right now and not in debt.