Tighter belts

The pressure on the american consumer continues to build up. Cumulative inflation is affecting discretionary spending, the back bone of the American economy, and as consequence of it (and the deficit), long rates have remain high enough to keep mortgage rates elevated, not from historical standards, but when combined with the average price of a house, it makes affordability historically low. In addition to that, as you can see in the chart below, delinquencies on the beloved Multifamily housing sector are reaching the levels of the great financial crisis. About 4.3% of all consumer debt is in some stage of delinquency, with serious delinquencies at 2.8%, up from around 2% a year ago. And that’s important to the president, because when consumers tighten their belts, the popularity of their president goes down, and that is something that Trump can’t stand. That’s why he’s pressuring Powell to lower rates, he knows what it is to be pressured by debt, particularly mortgages. He is trying to provide a break to the consumer with his One Big Beautiful Bill, but he will create inflation that will increase the pressure on consumers even more.

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