Casualties in the war on inflation

A Bloomberg article on car repos showed up in my Twitter feed. Of course it was behind a pay wall but here it is without the paywall.

Higher interest rates are making it even more difficult to make the monthly payments. The average new auto loan rate was 8.02% in December, up from 5.15% a year earlier, according to Cox Automotive. The rate can be much higher for subprime borrowers.
Read more: Wall Street Warns of Trouble Brewing in Auto Loans as Prices Dip

For Hatch, the total monthly bill for his car reached about $1,000, including the cost of insurance, thanks to a whopping 26% interest rate. Even if he can manage to save up enough to get the car back — about $1,100 for the repossession fee — there’s a strong chance he won’t be able to make the payments in subsequent months, especially now that he’s unemployed.

It seems to me that we have inflation + the inflation caused by increased interest rates. Is there a way to factor out the inflation resulting from the increased inflation caused by the Fed’s interest rate increases?

Meanwhile talking heads on CNBC this am are saying its remarkable how spending on things like travel have held up this long after those cost increases. They say this is due to the saving people have from the Covid stimulus programs. Also rates of employment holding u well. Uncharted territory. American Express reports record use of credit cards.

How long will it take to deplete those savings? Middle America gripes about the price of eggs etc, but there is no shortage of money (yet).

1 Like

I am not sure that is a random sample. I would be more interested in the change in the rate that Visa, Master Card, and Discover users are not paying off their balances each month.

1 Like

Oh please. People got a couple thousand bucks. Much of that went to pay current bills, mortgages and the like. Even if a large portion of people “saved”, it’s been two years since the first payment, and it’s likely that most of that has passed through their fingers by now. If that’s all it took to support the economy to this extent, we could have a glowing economy for as long as the universe exists.


This isn’t exactly what you asked for, but this has a more broad data set.


Individuals received a couple thousand bucks (if your income was low enough) but “businesses” (and I use that term loosely) received millions in forgivable loans.


Celebrities who received these loans include Jared Kushner, who has a net worth of $800 million. He received a $3,001,119 loan that was forgiven, The Daily Mail said. Khloe Kardashian, whose net worth is $60 million, got the $1,245,405 loan for her business Good American LLC forgiven, while Reese Witherspoon’s $975,472 will not have to be paid back. The actress is worth $400 million, according to the Daily Mail. Yeezy, Kanye West’s company, received $2.3 million, although whether that will be forgiven is unknown, the Daily Mail said.

The article goes on to state:

“It just goes to show you that there are winners and losers,” Roth said. “The wealthy and the well-connected are taken care of at the expense of those who are not.”


An NPR analysis of data released on Jan. 8 by the Small Business Administration found that 92% of the loans issued have been granted full or partial forgiveness. That includes loans to companies with mega-rich owners.


I got a non-forgivable EIDL loan. Terms: 3.5% fixed rate 30-year term.

1 Like

Congratulations @syke6. I hope you were able to use the proceeds to sustain and hopefully grow your business.

As a volunteer business counselor, I helped lots of small businesses get PPP Loans that were then forgiven. I didn’t help anyone famous, just regular folks who are “all in” on their small business and did whatever it took to stay in business during the pandemic and post-pandemic.

I also saw my share of folks who didn’t qualify for the PPP mostly because they did not meet the criteria for mandated payroll reporting. I was sad that I was not able to help them get “free money” but I did my part to help them understand that running some or all of their business “off the books” might not always be the most beneficial thing to do.

I think the article above is a bit slanted. It says that the money was given to the “famous people” but in reality, when you read closely, it says the businesses owned by these famous people qualified for the PPP loan forgiveness. Who knows if these businesses were cooking the books or not, but I do know that the IRS and the SBA were sharing information and that information had to be 100% consistent between what was reported to the IRS and the information that was recorded on the application for the PPP Loan or the loan would be automatically denied.

What the article says to me is that these famous people are running profitable small businesses and they employed people and paid both payroll and federal income taxes. That’s why they were able to get PPP Loans forgiven.



Thanks for at least attempting to answer the question that I raised. You did more than anyone else so far. It is really irritates me when people use a question to go off on some tangent without acknowledging that.

1 Like

Some people got a LOT more! I have one close relative that was working and earning about $320/wk. When everything closed down, they got $280/wk state unemployment plus $600/wk federal supplement … for 20 weeks or so. That’s over $15k! And because everything was closed they couldn’t spend any of it, except for some tiny amazon purchases here and there.

I have one relative CEO of a larger non Profit who got PPP.

Another relative CEO of a bar restaurant chain who got PPP. He is now rich compared to other wise without the PPP.

The guys who got $600 per week got peanuts in comparison.

1 Like

Lots of money went into the US economy to support the economy during Covid. That included direct payments, business loans, rent support, and blocked forclosure on mortgages. Companies were also paid to avoid laying off workers. A lot more than a couple thousand bucks.

The stats show clearly that consumers are still spending. All those help wanted signs could be a factor. But consumers clearly have the funds. Even though gas prices and grocery prices are up substantially they are still spending.

I bought stock in a debt collection company 6 months ago thinking they would do well. It was a dud. Sold it last month.

1 Like

Not sure this gets at what you are asking, but your question makes me think of the following.

The increased cost [to purchase something like a home or vehicle with a loan] attributable to increasing interest rates is an increase in financing cost (i.e., the cost of money). In the short term, higher interest rates make buying a home or vehicle with a loan more expensive because of the corresponding higher financing cost. However, in the medium to longer term it seems that higher interest rates (relative to a scenario with lower interest rates) might actually act to drive down the cash price of many things that might often be purchased with a loan such as a house, vehicle, or financial asset (and this would be deflationary). I think the history of the last 20 years, in both real estate and the financial markets, support this last statement and I suspect few people working in finance and economics would dispute it.

Because of the above effects of interest rates on the cost of things, I personally think many of us, in the long term, are better off with interest rates not being too low. When interest rates are persistently too low, this drives up the cash price of things like houses. Because a house is an expense that I must incur, I’d prefer it cost less and hence prefer interest rates not be too low. In fact, if the cash prices of homes and vehicles were lower, people wouldn’t need to borrow as much to purchase them.

1 Like

Don’t forget all the billions that went to the state and city governments. For example, we read that:

“The Wisconsin Policy Forum reported in June 2021 that the state was poised to receive more than $19 billion in federal pandemic aid.”


1 Like

The above is the of the reasons that consumer spending is near the brink of decline according to WSJ.

The engine of the US economy–consumer spending-- is starting to sputter.

Retail purchases have fallen in three of the past four months.

It was kind of interesting the way it played out. As it turns out, I didn’t need it, but at the time I thought I probably would. Initially, COVID clocked my industry right in the kneecaps and the big players had to layoff lots of staff. But then things can roaring back and the big players couldn’t scale back up. Rates and fees went way up and I booked record quarters. This spring I decided to slow down and by summer even that sounded like too much work. So I retired. I bought a weekday-only season ski pass, and boy are my legs tired.


Well that is certainly a gloom and doom article, and it may even be right. However it appears to me the writer is searching for any breadcrumb he can find when he includes “housing sales are off” since that was totally predictable after one of the most stellar years in housing history, that “shedding temporary workers…taking longer to find new ones” is quite opposite of other things I have read (hundreds of thousands of tech workers, oops, in high demand in other industries and being hired often before their severance runs out), and so on.

Yes, it’s possible that we are on the cusp of a slowdown, I don’t deny that. It even seems likely, given the robust push the pandemic gave to “stay at home” projects like remodeling and exercise bikes, and then the even more robust push to service industries once the notion of “it’s over” took hold.

We could all afford to settle down a little, including the once, current, and probably future overvalued stock market. There are lots of things on the horizon, but heck, we’ve just come through one of the most turbulent economic periods in the past half century. I’d say the glass is 3/4 full, not 1/4 empty.

I’m not sure what that has to do with it. They kept people on the payroll. They started delayed projects, or invested in new ones. That keeps people employed, but doesn’t dump jillions into their bank accounts to blow on yachts and hookers. (Guns and butter, if you prefer.)

I’m preaching to myself here, I guess, but “don’t worry, be happy.”

1 Like

Mr market still does not believe Powell is serious.

Ongoing data showing a drop in inflation, along with slowing economic growth, will induce the Fed to pivot to driving interest rates lower. We expect the Fed to even begin cutting the fed-funds rate before the end of 2023.

Fed chair Powell said in his news conference Wednesday afternoon that rates are “not yet in a sufficiently restrictive policy stance” and that the Fed expects “ongoing hikes”—note the plural—to be appropriate.

But Powell’s remarks failed to dissuade the market of its more-dovish views. Indeed, bond yields actually fell moderately, with the two-year Treasuries down about 0.10 percentage points on the day. Markets are probably focusing on Powell’s statements that the Fed’s decision-making will be heavily “data dependent” and conducted on a “meeting to meeting” basis.

Concretely, that means that if data comes in showing inflation coming down quicker than the Fed expects, then the Fed will adjust its anticipated monetary tightening downward. In particular, while the Fed is still expecting core inflation of 3.5% by the end of 2023 (in terms of year-over-year growth in the Personal Consumption Expenditures Price Index), we expect core inflation to fall much faster and reach about 2% by end of 2023.

What will be the market reaction if inflation slows but not enough for Powell to stop ever increasing interest rates by .25% a month? Big decline? or Maintain current level as investors still live on the river DENIAL?

The market has already priced in another 25 BP increase in March. I don’t know the futures forecast for April but if they bump it another 25 in April and then stop, I don’t imagine the market will flip out and sell off more than a couple of percentage points.

We really matters is what the market is forecasting for later this year and early next year - rate reductions - as your article mentions.


January’s blowout jobs report, posted Friday morning, showed nonfarm payrolls rose by nearly three times as much as economists had been expecting.

No, the economy isn’t slowing.

No, the Fed’s big campaign of interest-rate hikes all last year hasn’t shown up yet on Main Street.

And no, there’s no reason to expect rate cuts any time soon.

Oh dear. A lot of investors just learned again, the hard way, the old rule: When someone tries to tell you something about themselves, listen.

On Wednesday afternoon Federal Reserve Chairman Jerome Powell said over and over again: We’re not done raising interest rates. We’re not finished. We’re not expecting to cut rates any time soon. Barring a complete surprise, we’re not expecting to start cutting rates this year. We would much rather raise rates too high and keep them high for too long than start cutting them a moment too soon.

When the Fed chairman says he’s going to keep rates higher for longer, who are you gonna believe: Wall Street or your own ears?

1 Like