The latest Consumer Price Index (CPI) numbers came out. The CPI was up 0.1% in May 2023. It now stands at 4% year-over-year.

The less volatile median CPI came in at 0.4% in May, with the year-over-year now at 6.7%.

So the rate of increase seems to be going down, which is a small piece of good news for middle class America.

Still, the improving number is still at 4%, which is double the Fed’s target. If you spend like the CPI is measured, then your dollars still depreciated by 4% over the last year, and that is after sustaining far worse before that.

The price of gold initially went up, but then ended the day lower. Stocks went higher on the news, as investors see this as good news for stocks because the Fed is less likely to hike its target rate at the next meeting, which just happens to be tomorrow – June 14.

I have generally been in the camp of expecting price inflation to decline because of the Fed’s very tight money policy.

Stock Investors are Looking at the News All Wrong

Maybe some stock investors are getting it right. There are many day traders who hop in and out of the market. Some of them are making money.

But for the investors who are buying and holding U.S. stocks, it has disaster written all over it.

The lower CPI is good news, but it is also serving as a warning signal that a recession is on the horizon. Actually, the extremely inverted yield curve is the main warning signal, but the lower CPI is just confirmation.

To be sure, there isn’t a tradeoff between economic growth and inflation. The 1970s blew that myth out of the water. You can certainly have high inflation (price or monetary) and still have recession.

But in this case of 2023, the Fed has had a tight money policy for over a year. They have been raising interest rates in the face of an inverted yield curve.

If the Fed doesn’t reverse course because it has to bail out the banking system, and it keeps a relatively tight money policy, then we should expect consumer price inflation to go down, and we should expect a recession sooner rather than later.

I am investing accordingly. The major fall in stocks is going to happen. How much of a bigger warning sign do investors need at this point?

I wrote very little about the debt ceiling leading up to the debt ceiling “deal” that just recently happened. I think the only time I mentioned it was when writing about yields on short-term U.S. Treasury bills.

On April 25, 2013, I wrote: “I have little doubt that the Republicans in Congress will allow the debt ceiling to be raised. Sure, there will be much political theater, and maybe there will be some concessions to have the appearance of some fiscal sanity, but I highly doubt either party will allow for an outright default at this stage of the game.”

I spent little time writing about the debt ceiling drama because the outcome was so utterly predictable. It always happens this way. There is always a “deal” in the end. It is a deal for the state planners. It isn’t a deal for the American people, and this time was no different.

Thomas Massie Supports Debt Ceiling Deal

It was surprising that my two favorite people in Congress supported this whole fiasco. Marjorie Taylor Greene (MTG) went along with the debt ceiling deal. She is typically courageous, outspoken, and mostly good on the issues. But she’s still a conservative and not a libertarian, so I am not completely surprised by this.

I was more surprised about Thomas Massie, who is the most libertarian member of Congress. It was Massie who held up the trillions of dollars in COVID emergency spending in 2020. That is what led Trump to denounce Massie and say that the Republicans should kick him out.

Massie and MTG both supported Kevin McCarthy for Speaker of the House when there was that drama. They at least supported him in the sense of voting for him. I understood this for strategic reasons. They were gaining more power (in a good way) over committees and saw that they would get some valid investigations.

McCarthy did have a hand in releasing January 6th footage to Tucker Carlson, so McCarthy hasn’t been all bad up to this point. Even if he did it for purely political reasons, you can understand why MTG and Massie would take this outcome.

But on the debt ceiling deal, I really don’t understand. Massie has tried to explain that the deal isn’t anything great, but it is about as good as we can hope for because it may force slight cuts in spending.

His reasoning wasn’t strong for me. I think he got it wrong on this one. I am not willing to completely discount him from now on because of this one action, but it is a strike against him in my book.

It just shows that there is no Ron Paul in Congress.

If You’re Going to Compromise…

It isn’t always easy to decide how to vote in Congress if you are truly trying to gain greater liberty for the people. Do you vote for something that is unconstitutional if it moves you in the right direction? If you can get a 50% cut in funding of the Department of Education, should you support it even though it is still funding an unconstitutional department?

I don’t know if there is anything unconstitutional about this debt ceiling deal. I don’t think it actually approves any spending, but I could be wrong on that point. It allows the U.S. Treasury to issue more debt.

Anyway, I would have voted against this thing even if I thought it would lead to a little reduced spending. One of the reasons is that the recent baseline is ridiculous. The spending next year will still be over $1 trillion more than it was in 2019.

Spending absolutely exploded in 2020 and 2021 with the excuse of COVID lockdowns – which the federal government recommended and state and local governments implemented. So it is a bit of a joke to say you can cut spending by 1% or so from last year after it had gone up so much before that.

Imagine a family that makes $60,000 a year in income. The family is spending $70,000 per year and racking up credit card debt to the tune of $10,000 per year. The next year, the family has an emergency and has to spend $90,000 that year. Then the emergency ends.

The next year, the husband/ father presents a budget to his wife. He says they are only going to spend $85,000 this coming year. He is cutting the budget by $5,000 from the previous year.

Would you call that fiscal sanity?

The Unlimited Debt Ceiling

It seems that the debt ceiling is basically unlimited at this point. Actually, with this “deal”, it is unlimited until 2025.

The other joke in all of this is that there is nothing binding on future spending. It is easy for Congress to override any promises made in this bill. They can always push it off to the next session of Congress.

If any true fiscal conservative is going to agree to anything, it should be for significant spending cuts right here and now. It shouldn’t be about what Congress will spend 2 years from now or 10 years from now. That never happens.

The government is still collecting something around $4.7 trillion per year from taxes. So even if the debt ceiling weren’t raised, it can still pay interest on the debt and fund the so-called entitlement programs. But they have an empire to run around the world, and they have to make sure that the war in Ukraine keeps going.

So they’ll threaten grandma that the Social Security checks may not come if there isn’t a debt ceiling deal, but they won’t threaten an end to funding the oligarchs in Ukraine.

If someone in Congress wanted to avoid drastic and sudden spending cuts while also moving towards more fiscal responsibility, they could at least propose something like raising the debt ceiling by $50 billion per month. After one year, it could go to increasing by $40 billion per month.

If this trajectory held, then you would eventually get to a balanced budget.

To start off by raising it by $50 billion per month, that would be $600 billion per year. So Congress would actually have to cut spending because the annual deficits are way beyond that mark at this point. But we can’t even take that modest step.

Future Generations and Current Generations

There is one last point I have about the overall national debt that is widely misunderstood.

We often hear that future generations will pay for this. And that is correct. Of course, they could choose to default, but they are still paying for it in the sense of less compounding growth.

But let’s be real clear that increasing the debt hurts us right here and right now. We are taking productive capital and handing it over to the government to spend. Perhaps more accurately, we are handing it over to government to waste and misallocate.

We are getting poorer right now than we otherwise would have been because of the increasing debt. A decrease in government spending might hurt some specific individuals who benefit from it, but society as a whole would be wealthier if the government spent less. That capital could be used for productive purposes to make consumer goods and services cheaper.

It is actually amazing how much people are still able to flourish in an environment where the national government alone is consuming over $6 trillion per year. Just imagine how much wealthier we would be if that number were cut in half.

I have written some rather scathing articles on Thomas Sowell. They go back a long way. One of the reasons I have even bothered to write about Sowell is because many libertarians have idolized him.

As far as I know, Sowell is still alive. He will turn 93 at the end of this month, but he no longer publishes articles.

Sowell certainly had a talent for writing. His writing was clear, concise, and oftentimes convincing. He was very good on economics when it didn’t involve the topic of central banking. He was very good on his writings about race.

I made the case in January 2012 that Sowell is far from being a libertarian. I called him an elitist and a moron, and I don’t typically call names. It was my frustration coming through when Sowell was being critical of Ron Paul and those who supported him.

I went after Sowell again in 2015 when he wrote an article in favor of vaccines, to put it mildly. My article was titled “Thomas Sowell: A Statist’s View on Vaccines“. It was in response to an article written by Sowell about vaccines and autism.

Sowell Never Was in the Liberty Camp

I still see things to this day praising Sowell. It is people who are generally in the pro liberty camp who will sing his praises. I often see quotes attributed to Sowell that were supposedly a warning to today’s increasing totalitarianism.

I recently read an article discussing the COVID vaccines. This was from someone criticizing the vaccines and mandates. Yet, one of the commenters referenced Thomas Sowell and his warnings about government and authoritarianism. This person obviously didn’t know what Sowell’s position was on vaccines.

In that 2015 article by Sowell, he said there were false claims that linked autism with vaccines. Sowell claimed that the number of children who had autism had remained relatively stable. It was just that the definition had changed.

I think it is quite evident that autism has increased dramatically in our world today (or in 2015) as compared to a couple of generations ago. But I can see where people would have disagreements here, just as there are disagreements on whether any increase is due to vaccines.

But the kicker in Sowell’s article is the last sentence. He says:

“Some say the decision to vaccinate or not should be the parents’ choice. That would be fine if their child would live isolated from other children. But that is impossible.”

In other words, since that is impossible, Sowell favored mandatory vaccination by the state.

Replace Measles with COVID

Sowell specifically referenced measles in his article. I’m not sure why he didn’t reference the MMR vaccine, which includes measles, because this is the vaccine that is most often claimed has a link to autism.

Before the 1970s, measles was a common occurrence. For most kids, it meant a few days sick at home. With anything, there are always risks. It was possible to die from (or with) the measles, but it was extremely rare. I would say it was far more rare than getting autism.

You can watch an old episode of The Brady Bunch where all of the kids get the measles. There was no panic that their lives were in danger. It is hard for them to go back and change the narrative now.

Anyway, Sowell was very clear in 2015 that it should not be the choice of parents whether or not to vaccinate their kids. Since children couldn’t live isolated, they should not have that decision. Presumably, that decision would be made by the state.

Sowell specifically wrote an article on this. It wasn’t some throwaway line in an interview. So if Sowell favored forced vaccination in 2015 for something like the measles, then surely he would have favored forced vaccination for COVID in 2021.

Unless Sowell changed his views in his late 80s or early 90s, then he supported Joe Biden’s COVID “vaccine” mandates. After all, it wasn’t possible for people to live in isolation. So according to Sowell, it isn’t their decision. It is the government’s decision.

Anti Liberty

Some people got annoyed by my articles criticizing Sowell in 2012 and 2015. Sure, they say, he wasn’t a perfect libertarian or he wasn’t perfect on every issue, but he was generally great in favor of liberty.

I don’t really care how many great books he wrote or how many great quotes there are by Sowell. He wasn’t just off on a couple of issues. He was terrible on the biggest issues. He was terrible on foreign policy, and he was terrible on the issue of central banking. And on top of it all, he favored mandatory vaccination.

I don’t care how great Sowell might have been on race or tax issues or explaining supply and demand. He got the really critical issues wrong. And it was positions like his in 2015 on forced vaccination that led us to the forced COVID shots in 2021.

Sowell wasn’t just off on a few issues. He was part of the problem. How many people read his 2015 article and accepted that it was ok to favor forced vaccination and still be in the liberty camp?

We can directly thank people like Thomas Sowell who set the stage for Joe Biden COVID shot mandates in 2021. I think libertarians should really stop praising the guy so much. He was wrong on all of the most important issues.

There is a lot going on politically and culturally in the U.S. and around the world. When this decade is over in 2030, it is hard to say what the big stories will be.

If there is no nuclear war or major world war, then the story inside the United States might be the decline of the American middle class.

The problem is that this isn’t a story that makes headline news. It isn’t something that just all of a sudden happens like other big events.

Maybe there will be the occasional report on the decline in real wages, but it won’t get much attention after that. Yet, for most people, this is a really big story.

While the people alive today get to enjoy technology as never seen before, living expenses for basic needs have gone higher than in previous generations.

It is a sad state of affairs when you can see that the young generation of today might be worse off than their parents.

Just as economic growth slowly compounds over time and is barely noticed, the slow economic decline is barely noticed at first.

Compounding Declines

Compounding interest is a beautiful thing when you are able to take advantage of it. Unfortunately, compounding can work in the other direction too.

If price inflation is running at 5% and wages are going up at 3%, then you are losing 2% per year. It’s actually a little worse than this because you have to pay taxes on the additional 3% in nominal wages.

When this happens year after year, it starts to add up. The first 2% might not feel like much. It might just mean a little less accumulated in savings. It might mean eating out one fewer time per month.

But then it starts to grind you down. The cuts you made last year aren’t enough to get you through this year. And the harder cuts you have to make this year aren’t going to get you through next year when your real wages decline again.

Even if wages after taxes keep up with price inflation for one year, you are still down from the preceding years when wages didn’t keep up.

Different Worlds

At the risk of sounding like Bernie Sanders, there seem to be two classes of people. There are the rich, and there is everybody else.

Maybe there is a third category of the upper middle class who are doing well but still on the treadmill of life. They are able to afford many luxuries and show no signs of struggling financially, but if they ever experienced a significant decline in income, they would quickly be poor.

I see it in my own life and the people I know. There are some people who are almost careless with money. They will be quick to throw around hundreds of dollars for very minor conveniences. Then I know people who are just barely getting by and having to pinch every penny.

I feel like the disparity has grown in the last few years. I have seen almost no change in the behavior of the people I know who are well off. If anything, they are spending more than ever. The people who are middle class but barely getting by are having a much tougher time today than, say, 4 years ago.

Of course, I don’t blame those who are doing well as long as they are making their money honestly. I don’t think they should be as wasteful or careless with their money as I often see, but it is their choice.

The solutions of the likes of Bernie Sanders consist of more government spending and intervention, which is the opposite of what we need. A major reason for the big disparity right now is exactly that, coupled with a previously loose monetary policy from the Federal Reserve.

A Six-Figure Salary

I saw a recent post by someone in a financial independence (FI) community saying that their family income was about $90,000 per year and they were barely making it. They were able to contribute to a 401k plan, but there wasn’t much to save after that.

Her housing expenses were less than $1,000 per month, so it probably wasn’t a high cost of living area. I don’t know if that included taxes and insurance, or if it was just principal plus interest on the mortgage. Still, it isn’t a big housing payment in today’s world.

The comments in response were interesting. Some people were critical saying that she should be able to save with that kind of income. But I think most of those comments were coming from people who either made more money, already had significant savings, or didn’t have any children at home. (Kids are expensive, no matter what anyone says.)

Many other comments were sympathetic, and many people could relate even if their situation wasn’t quite the same. There was definitely somewhat of a common feeling that prices are going higher and wages are not keeping up.

It is sad to say that making a low six-figure income in today’s world isn’t really that great. It is better than a lot of other people, but it doesn’t put you into any kind of wealthy or rich status. You can certainly become wealthy over time with a low six-figure salary and frugal living, but it will take you a long while.

Most people don’t want to live very frugally though. If you have a family, you want to be able to take a vacation. You want your kids to be able to play sports and go to the fair. You want to be able to eat out at a restaurant once in a while. It’s nice to have a streaming service to enjoy some movies.

A Revolt of the Middle Class

The decline of the American middle class is a result of massive government intrusion in our lives. The decline of the American middle class may also be the only thing that will stop and reverse this intrusion.

It’s easy for Americans to not pay attention to some war overseas. It is easy to take a political position on this or that issue. But when a formerly middle class family is all of a sudden struggling to pay the bills and put food on the table, they may start paying attention.

The $100 billion or so being sent to Ukraine doesn’t sell as easily with the American public when American living standards are in decline.

There is a big recession coming, and there will likely be big changes that come with it. One morning, the American middle class will wake up and realize that they are no longer middle class, and they aren’t living the so-called American dream.

This is when positive change towards liberty becomes possible.

The 2024 presidential race is heating up. It does seem to be more interesting than normal.

There are interesting Republicans with Trump, DeSantis, and Ramaswamy. They each have their good points and bad points, but at least they aren’t all bad points like Biden.

On the Democratic side, there is Robert Kennedy Jr. Even though the DNC, the corporate media, and the rest of the establishment will try to censor him, there is alternative media to the rescue. When the establishment can no longer ignore him, they will smear him.

On the Libertarian Party side, there is the possibility of Dave Smith, who is a great spokesman for liberty. I could envision Dave not running for the LP ticket if he thought Kennedy had a decent chance to win. It’s not that Kennedy is a libertarian, but he has the potential to restore a lot of sanity to our world when we really need it.

Kennedy actually tweeted a link to a LewRockwell.com article about the middle class being decimated. This is a good sign in several ways. Just the fact that Kennedy is mentioning an article from a more radical libertarian website is something. It is also encouraging that one of his talking points will be how the middle class is getting destroyed.

It is interesting to see the different candidates and how it might play out. A lot of focus is on personalities, which do tend to matter a lot in politics. But one thing that is largely being ignored is that Biden and the Democrats (excluding Kennedy) might be in real trouble in 2024 if we hit a deep recession. With the inverted yield curve, this is looking highly likely.

It’s the Economy, Stupid

The focus on the economy by James Carville and Bill Clinton in 1992 wasn’t wrong. It’s not that they had the right answers, but it appeals to people’s self interest.

It’s nice for some people to wave a flag for Ukraine, but are they really willing to sacrifice their lifestyle to funnel tens of billions of dollars to the military-industrial complex and a bunch of corrupt oligarchs in Ukraine?

A Bill Clinton presidency actually sounds pretty good these days compared to Biden. Even though Clinton was and is a criminal, at least he cared about how others thought of him. So he wasn’t purposely trying to destroy civilization.

The middle class is already getting hammered with high price inflation and wages lagging behind. If you throw in a major recession and deflating asset prices within the next year, it is hard to see how Biden wins re-election. It is hard to see how any Democrat not named Kennedy would win the presidency. The only reason Kennedy would have a chance is because he has already separated himself from the establishment Democrats.

The Winning Message

It’s sad to say, but a family of four making around $100,000 is barely getting by these days. It’s not that such a family would struggle to put food on the table, but there is an expectation to have some joy in life.

When you take out taxes, health insurance premiums, other insurance costs, housing, and food, it doesn’t leave that much.

Sure, you can cancel cable and streaming services, give up your smartphone, and never eat out at a restaurant, but who wants to live like that?

You can say “no” to taking the kids to their favorite amusement park. You can cancel all of their sports and other activities and not throw any birthday parties. If you do all of that, you will be just fine.

Is that a winning message for middle class America? “Just suck it up and live very frugally, and you will get by just fine. We have to send more money to Ukraine.”

This is partly why Donald Trump won in 2016. If Rand Paul had sold this populist message, maybe he would have stood a chance.

This is why Dave Smith and Robert Kennedy have a good chance of really stirring things up in this presidential election. Neither one has a good chance to win, but they sure can disrupt the establishment.

While it is very important to oppose the wars and infringements on civil liberties, the winning message is to tie it all back to the struggling middle class.

Sometimes people just want acknowledgement that life is a struggle. If you start there, then a certain trust is automatically built. I don’t think anyone actually believes that Biden is working hard to help the lives of ordinary Americans.

In 2024, it is possible to have a pro liberty message and a populist message at the same time. It starts with acknowledging that the middle class is being hit hard.

It’s hard to believe, but the yield curve is getting steeper in the wrong direction. Well, it’s the wrong direction for anyone not prepared for a brutal recession ahead.

This week, the financial media and even some Fed officials are saying that another 25 basis point rate hike by the Fed might be necessary. This is in order to fight that stubborn inflation that the Fed created in the first place.

With this, the short-term yields went higher this week. The one-month yield went from 5.69% on Monday to 5.95% on Thursday. At the beginning of the month, it was at 4.49%. The other short-term yields did not go up this dramatically.

The longer-term yields have gone up a little bit this month, but not to that degree either. So the inverted yield curve gets more inverted, at least using the 1-month yield.

The spread on the 3-month yield and the 10-year yield is 155 basis points. It is even worse comparing the 1-month to the 10-year, which is 212 basis points.

The crazy thing is that the yield curve has been inverted in most spots for the entire year (since January 1, 2023). How long will this go on for?

Timing a Recession

While the market forecasts another federal funds rate hike, it also projects that the rate will be lower than where it is now by the end of the year.

If the Fed is in this desperate fight against inflation, why would it start lowering rates again in 2023? The only answer is that we will be in a brutal recession, which will include more failing banks.

The timing on all of this is hard. It is typical for an inverted yield curve to become uninverted (if such a term exists) before the worst of the recession hits. It’s hard to say what will happen this time.

It’s also not clear if there is causation or correlation. If a recession becomes evident, then investors are likely to go into long-term bonds, which would drive long-term yields lower. But the Fed would also likely react with a lower target rate.

The Price Inflation Factor

The additional complicating factor in all of this is price inflation. When the financial crisis hit in 2008, price inflation wasn’t a big factor like it is now.

If price inflation is coming down with the onset of a recession, then expect the Fed to drop rates again and possibly go back to QE (i.e., creating money out of thin air).

But what if price inflation is still stubbornly high? If the CPI numbers are still coming in at 5%, will the Fed risk losing control of the dollar in order to “save” the economy.

As I have said many times, I don’t think the Fed is going to intervene to save the stock market. I don’t think the Fed will intervene to lower unemployment. I think the Fed will only intervene if major financial institutions need to be bailed out or if the bond market is in major turmoil.

The Fed does not want to further jeopardize the dollar’s status as the world reserve currency. It certainly does not want to destroy the dollar. The Fed is reckless, but not as reckless as Joe Biden and company. If the Fed loses control of the dollar, the Fed officials risk their own power.

The Fed is also not going to purposely try to save Biden’s presidency. Fed officials care more about themselves than who is president.

The recession should be in full swing by the 2024 election. This is a major factor that isn’t getting much discussion in all of the political talk out there.

Now that the Durham report has been released and shows how the FBI, CIA, Obama, Clinton, and Biden all colluded to make up a story about Trump colluding with Russia, it is time for the Democratic establishment media to come up with a new plan.

I’ve got it for them.

You see, John Durham himself is actually a Russian agent. He has been colluding with Russia to make up this report exonerating Donald Trump.

The Durham report has all of the earmarks of a Russian disinformation campaign. Durham is obviously a Putin puppet.

That’s all you have to tell the people watching CNN and MSNBC, and they will understand that this is more Russian meddling. They clearly understood that the COVID vaccines were safe and effective and that we had to fund Ukraine’s fight for democracy against Russia, so this should be no problem.

Actually, now that I think of it, why mention anything at all? The establishment media doesn’t have to say anything about the Durham report at all. It’s not as if the viewers will question anything they hear about it. They may not hear anything about a Durham report anyway. They don’t trust any alternative media.

But just in case one of their Facebook friends mentions something, or perhaps they catch something about it on a Tik Tok video, maybe it is best for the establishment media to just briefly mention the story and move on.

They can just say that the Durham report was released, and it did not recommend prosecuting anyone involved. It did not, however, 100% prove that Donald Trump is not a Russian asset.

All of those things are technically true by themselves. The media should be able to cover this story in 15 seconds and move on to more important things like climate change and white supremacy.

As long as the people don’t get curious and consider alternative media, then everything should be fine. Trump is still a Putin asset for at least half the country.

The mortgage rates today are a lot higher than they were a couple of years ago. They are still not considered high by historical standards, but it is painful for someone who needs a new mortgage today because of the big difference from the recent past.

I was incredibly lucky to have refinanced in very early 2021. I got a 15-year mortgage at 2%. I am often an advocate of paying down the mortgage (with certain exceptions) during more normal times, but it does not make much sense for me to pay extra on a 2% loan. I can easily get a better return on a cd or Treasury bill, even accounting for taxes.

As of this writing, a 30-year fixed rate mortgage would have an interest rate around 7%. A 15-year fixed would be a little under 6.5% for most people.

If you look at a 5-1 ARM, the rate is a little below 6%. This means the rate would be fixed for the first five years before adjusting. So for the first five years, this is the best deal.

If you are buying a house that you are likely to sell in the next 5 years, then this would make more sense than a regular fixed-rate mortgage. But I don’t recommend doing this in most situations due to the high transaction costs of buying and selling real estate.

Which Direction Will Interest Rates Go?

Your guess is as good as mine.

The price inflation significantly above the 2% mark indicates that rates could go higher. If the Fed has to keep a tight money policy to fight inflation (that it created), then this could mean even higher rates.

On the other hand, the yield curve is highly inverted, mid-size banks are failing, and a recession looks highly likely in the next year or so. This points in more of a direction of lower rates. If price inflation isn’t too much of a problem, then investors will seek safety in U.S. bonds, which will drive rates down.

It is hard enough to figure out where rates will be in a year or two. If we knew this for sure, then we could get rich playing the bond market. It is even harder to take a good guess where rates will be in five years or more when a mortgage might adjust.

Therefore, you shouldn’t really take this into consideration when making a decision. Even though it is the only factor that will ultimately make it a good or bad decision to get an adjustable rate mortgage, it is a complete unknown. So the decision has to be made on the assumption that either scenario will happen.

Budgeting for the Worst

One way to decide is to figure out the worst-case scenario if interest rates are higher 5 years down the road. Will the higher mortgage payment be crippling, or could you still handle it?

Getting the fixed-rate mortgage is really a form of insurance against higher interest rates. You are locking in the sure thing.

Beyond your monthly budget, which is also hard to predict five years down the road, your overall financial picture does matter.

Some people have savings, but they don’t want to drain everything in order to not take on a mortgage. But five years down the road, maybe you will have enough saved to pay off or significantly pay down your mortgage. If you get the balance low enough at that point, then the higher rate may not matter that much to you.

Most people are not in this situation though, so a fixed-rate mortgage tends to make more sense. Also, if rates drop a lot, then you can always refinance.

Right now, the difference between a fixed-rate mortgage and an adjustable-rate mortgage is not that significant. It probably isn’t worth the risk to most people to get the 1% better interest rate with the unknown risk after five years.

Waiting to Buy

Right now is a terrible time to refinance. Unless someone had really bad credit with a really bad rate, then refinancing doesn’t make sense for most people. Rates are higher now than they have been in a long time.

But what if you are purchasing a new house?

My first recommendation is to wait. Even though we are in an inflationary environment right now (in terms of consumer prices), we are also likely in a bubble. Housing is part of that bubble in most places.

There is a good chance that prices will fall in the coming few years.

There may be some good bargains at that time, at least compared to what we see now.

It seems like a terrible time to buy a property because prices haven’t fallen much, but interest rates are much higher, which makes the monthly payments higher.

The exception, of course, is to someone who has the money to pay for a house without taking on a mortgage. Then you are in the driver’s seat. You can also get a better price with this negotiating power.

It still might make more sense to wait for prices to fall in this case, but at least interest rates don’t matter if you don’t need a mortgage.

For most people, it probably makes sense to wait to buy, but it always depends on your personal situation. If you are going to buy, it likely makes more sense to get a fixed-rate mortgage for 30 years. You can always refinance later.

The FIRE (financial independence/ retire early) community is better off financially than most, but even they are hurting. I recently read in an FI forum some people complaining (justly) about price inflation.

One woman said her husband is considering going back to work part time in order to help pay for the higher prices they are experiencing. I’m sure this couple could have stayed retired for several more years, but the problem is that they would run out of money eventually.

If you are truly FI (financially independent), then you should ideally be able to live off of your investment assets/ savings forever without them being depleted.

If you have two million dollars in assets, and you are able to generate a 5% return above inflation every year, then you can live off of the $100,000 in interest/ income produced from your investments. Meanwhile, the principal balance won’t go down.

Underestimating Inflation, Overestimating Returns

I saw some people comment and generally agree with the woman. They agreed that price inflation was taking a bite out of them too. This could be the case for someone already retired or for someone trying to save for retirement. Some people have had to postpone their retirement due to the increased prices.

I was also proud of a few people who pointed out that the slightly lower inflation numbers coming in just meant that the rate of increase was decreasing, but prices are still increasing. There was also some debate about how much price inflation would be over the coming years.

I think the only thing to criticize the woman who originally commented is that her and her husband underestimated price inflation. They did not take that into enough consideration in their planning. But at least they are not now in denial. They clearly understand the situation and are talking about doing something about it.

But there were a few people critical of her. They said that she doesn’t understand the 4% rule. They said that inflation would be back down to a 2% average soon. But in all of their criticism, I felt like it was they who didn’t understand.

The problem is that this woman who originally posted was really pointing out a major flaw in the FI/ FIRE community. In general, many people tend to underestimate price inflation and its impacts, while overestimating returns from investments.

The 4% rule itself tends to mislead people into retirement.

Returns Above Inflation

Many in the FI community will say that, over the long run, you should be able to get at least an 8% average annual return. They tell you to just invest in broad-based index funds.

This in itself is flawed. I have to point out that if you invested in the Japanese stock market in 1989, you are still down to this day. I don’t think what happened in Japan will happen in the U.S., but it shows that a long-term downtrend is possible in stocks.

On top of this, many people believe that price inflation will run around 2% per year. This assumption has been blown out of the water in the last couple of years.

When people talk about returns, it isn’t always clear if they are talking nominal returns or real (inflation adjusted) returns. This makes a major difference.

We’re now in an environment where price inflation is currently running around 5% (according to government statistics), while the stock market is shaky at best. Last year, most people lost money in the stock market while prices continued to go higher.

This combination of higher price inflation and low or negative returns is absolutely devastating to a portfolio. Someone’s dream of retirement can be shattered in the matter of a couple of years.

And I think this is just the beginning. Don’t count on price inflation returning to 2% or less with stocks returning 8% or more per year. It is a fantasy, and I think some people are starting to wake up to it.

The nightmare is finally coming to an end. Perhaps it was the most authoritarian U.S. government action perpetrated on the American people this century.

The corrupt and evil Biden Administration has finally thrown in the towel on vaccine passports, at least for now. The White House announced on May 1, 2023 the following:

“Today, we are announcing that the Administration will end the COVID-19 vaccine requirements for Federal employees, Federal contractors, and international air travelers at the end of the day on May 11, the same day that the COVID-19 public health emergency ends.”

We can only wonder why Biden and his handlers finally threw in the towel. It’s not because the vaccines don’t stop you from getting COVID. It’s not because the vaccines don’t stop transmission. It’s not because the COVID vaccines have led to many thousands of deaths and disabilities. Even though all of those things are true, they were true and well-known a long while ago. So why now?

Maybe they figured the damage, destruction, and chaos they wanted to throw on society was already mostly done. Now they have to worry about the next election. They figured they could lightly take their boot off of the throat of the American people and give them a gasp of breath.

Even the authoritarian Trudeau let go of the vaccine passports for international travelers in 2022. Maybe international tourism means more to Canada.

Never Forget the Damage Done

These vaccine mandates caused massive chaos in 2021 up until now. Many millions of people took the jab because of these mandates. It is impossible to know anything close to the exact number.

So even if all of the taxpayer-funded propaganda didn’t get you, the mandates came for you next. You were told to get the shots or else you were not allowed to keep your job and feed your family.

There are so many Americans who were faced with a really bad choice. Some stood strong and fought the mandates, and some really did lose their job. Many people folded and took the shot because they weren’t in a financial position to say “no”. I do not blame these people. I feel for them. It was essentially forced on them.

Even if you were willing to get fired, it was a very scary situation in late 2021. The corrupt Biden people were trying to force everyone to get jabbed who worked for an employer with 100 or more employees. This would have accounted for approximately two-thirds of the whole American workforce.

So if you got fired from your job for not take the medical experiment in your arm, then your future job choices would be severely limited. Remember, it wasn’t known for a little while if the Supreme Court would strike down that mandate.

International Travelers

Aside from the employee mandates, let’s not forget the pain and suffering for those who live in a foreign country who are not U.S. citizens or residents. Not everyone coming to the U.S. is going to Disney World or playing in a major tennis tournament like Novak Djokovic.

Imagine someone who was born in Europe and is married to an American. This person was not allowed to travel to the U.S. to see relatives without being jabbed. Think of the people who couldn’t travel with their spouse to see a dying relative or to celebrate an event.

This isn’t a tiny number of people. There are over 7 billion people in this world who aren’t American. Some of them have relatives and friends in the U.S. Some of them have business to do in the U.S. Some of them just want to visit Disney World.

This all adds up to this travel mandate likely impacting many millions of people over the last couple of years.

Chaos and Destruction, For What?

All of this chaos, death, destruction, heartache, lost sleep, anxiety, and depression was caused for what?

It was to line the pockets of the pharmaceutical companies. It was to enhance the power of the ruling elite. It was to give a thrill to the creepy depopulationists like Bill Gates. It was to cause chaos and destruction to civilized society for the people who want to destroy civilized society.

Let’s be clear. These so-called vaccines did nothing to stop infection of COVID. They did nothing to stop transmission. They cause death and disease in at least a small fraction of those who get them, and we still don’t know the long-term consequences with things like cancer and auto-immune diseases down the road.

But even if you naively believe that the COVID vaccines are “safe and effective”, the mandates are highly immoral. They were also illegal.

Yet, nothing happens to Biden and company and all of the shills who pushed the shots. But trust me on this. There are many millions of people who won’t forget what happened. They are not going to forgive the evil criminals who tried to force these shots on all of society.

Now the mandates are over, at least for now. It’s just like all of the other corrupt and illegal things done by Biden and company. They declare student loans forgiven. They declare COVID vaccine mandates on the majority of the population. The Supreme Court strikes some of it down. “Oh well, they declared it unconstitutional. Back to the drawing board for our next illegal and immoral edict with no consequences.”

I will never forget the evil that has been perpetrated on the American people from lockdowns to vaccine mandates.

We Won

To end on an optimistic note, somehow our side has won, at least for now. The non-vaccinated suffered discrimination and humiliation like no major group has experienced in the last many decades of this country. Not only were our jobs threatened, but many places like stores and restaurants prohibited the non-vaccinated from entering.

Despite all of the government edicts and the mass propaganda campaign that even continues to this day, we somehow fought it back. The ruling elite wanted vaccine passports to be the new norm, yet we were able to defeat it.

This seemed far from inevitable in late 2021. But here we are. I’m sure they are already planning their next stunt.

The road of tyranny is not inevitable. If there are enough people paying attention who refuse to consent to the evil, the authoritarians can be defeated. We should use the example of vaccine passports as hope that we can achieve greater liberty.