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America Now A 5% Inflation Country, Summers Says
I've said it over and over again, and it's not an especially popular talking point among my Democrat
I’m seeing more along this line – inflation isn’t getting down to 2% again, we need to resign ourselves to the new reality of mid-single digit inflation, hey what’s so bad about a new normal at 5% anyway, etc.
Am I the only one who finds this scenario very alarming?
I bet most investors would run for the hills if you told them Treasury yields are going to 6-7%, or mortgage rates to 8-10%.
But if the new normal for CPI is 5%, how can rates and spreads be otherwise?
I mean, mortgage rates were between 7% and 18% for three decades and between 7% and 5.5% right up until the GFC. 3.5%-5% mortgage rates are not normal. 2-handle mortgage rates are a total aberration. It’s the same general idea with the 10Y. Look at where 10s traded during the 1990s.
This is idea that people have in their heads about 5% 30-year fixed rates being “normal” and 1.5%-3.5% on 10s being “normal” is just plain old wrong.