Would you like advance warning about where to put your money?
Today we got a read on one of the direct consumer indicators in the economy, the consumer price index (CPI). From our friends at Mortgage Market Guide, this from their glossary:
“The Consumer Price Index (CPI) is a measure of the average price level paid by urban consumers (80% of population) for a fixed basket of goods and services. It reports price changes in over 200 categories. The CPI also includes various user fees and taxes directly associated with the prices of specific goods and services.”
I mention this because this “basket of goods and services” is now costing you less. In fact costs to the consumer have not dropped this much since 1950. This is a reflection of how much consumers are NOT buying and how much providers are reducing prices to get us to buy. Should we count our blessings? Is this Nirvana?
It is for the moment because the impact this low inflation reading has on interest rates is high, meaning that the pressure to increase interest rates we’ve seen in recent weeks is subsiding. For those of you in mortgage financing transactions, this gives you just a little tiny bit of additional time to close your deals at the low rates you wanted before the HAMMER drops!
The hammer you ask? We
ll the current fiscal stimulus program has doubled our national debt for the sake of economic stimulation and growth which will occur in the next few quarters. However, not without its own cost, the hammer - INFLATION!
In times of high inflation hard assets (gold and real estate for example) increase in value and securities (stock market and the dollar) or soft assets decline.
Words for the wise. . .
