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UNFTR Weekly Roundup |
Join us on Discord and Bluesky, and check out Max’s contributor videos on the MeidasTouch Network! |
This Is the Economy We Have Chosen I’ve been working on a housing crisis piece for what feels like forever. There are so many distractions and stories that keep taking me off track, so that’s part of it. But mostly it’s because housing is such a massive story with myriad plot lines and tangents. One storyline that keeps intersecting with our ongoing financial reporting is the idea that cutting rates at the Fed will somehow increase home affordability.
Conventional wisdom tells us that if we’re in a low Fed interest rate environment the movement of other rates will tend to move in lockstep. This is a gross oversimplification of the bond market but the narrative has taken hold in the financial news that housing affordability is somehow tied to the Federal Reserve. And much of this sentiment seems to be driven by the White House’s insistence that rates must come down precipitously in order to provide mortgage relief to Americans.
In practice, 30 year mortgage rates have a tendency to follow the movement of the 10-Year Treasury yield. It’s not an absolute, but it’s a guide. |
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Source: MacroMicro
But there’s an issue with the 10-Year in that it’s stuck above 4% and, in fact, increased after the last Fed funds rate cut. The direct impact of a high 10-Year Treasury yield is that the cost of the federal debt service remains elevated. This in turn widens the structural deficit gap and becomes a self-fulfilling cycle.
It’s important to isolate these rates and discuss what’s driving movement. In the case of the 10-Year it is a direct reflection of the sentiment toward U.S. fiscal management, or lack thereof. I put this out there because in recent weeks the 10-Year and the 30-Year average mortgage rate have begun to slightly decouple. Mortgage rates are slowly descending from the 2025 peak and down nearly 2% from the inflation-era high under Biden. |
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Source: MacroMicro
There is a small segment of the population that will look to refinance fixed rate mortgages taken during the inflation crisis. But for most mortgage holders, rates remain uncomfortably high. As for new homebuyers, the decline in rates is a welcome sign though certainly not enough to warrant a home buying frenzy in 2026.
The bigger issue is the average home price in the United States. |
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Source: MacroMicro
While the rate of change has slowed, it hasn’t gone into deflationary territory yet so the absolute average is still at a historic high. When you pair 6%+ mortgage rates (assuming you qualify) with stubbornly high market prices it explains the crisis.
But the point of this exercise is to illustrate the significance of the decoupling between the 10-Year Treasury and the 30-Year mortgage because it destroys the administration’s talking points about Fed rate cuts. This isn’t about you. It’s about them. The only cohort that truly benefits from Fed rate cuts are commercial property owners with variable mortgages set to the Federal Funds rate and balloon payments that are coming due. That’s the panic for them.
Mind you, it’s perfectly legitimate to want this. Otherwise we’ll have a commercial real estate sector implosion on top of everything else that’s going on.
So there’s good news and bad news here. The good news is that we’re at the early stages of a home valuation reset and potentially a period of declining mortgage rates. The bad news is that they’re coming down because we’re already in a deep recession. Consider the following:
If home prices tank then the potential nest egg value of tens of millions of Americans declines.
If mortgage rates plummet it means the entire economy has gone into the shitter and we have entered another 0% Fed rate environment.
The Fed has already quietly started another round of quantitative easing though it won’t call it that. They’ve announced that they will begin backstopping the repo markets by injecting a cash buffer to set a floor. The hope is that they will prevent any liquidity crises toward year-end because that’s when banks and non-banks will be taking cash off the table to prepare for tax consequences and to clean their books. So the bank bailout is already here, they just won’t call it that.
As for consumers and their principal asset, they’re on their own. The only way up and out of this, unfortunately, is a complete financial reset that destroys the housing asset bubble and the wealth associated with it. This is the economy we have chosen. Boom and bust, baby. Boom and bust. You can set your watch by it. |
Other things I’m obsessing over…
-Max |
Killer Left Take of the Week |
KLTW goes to Prof Steve Keen on Owen Jones. The merger of two personal favorites. One from across the pond and the other from down under. Jones is a prominent leftist journalist from the U.K. and Keen is an anti-classical economist who gained notoriety for calling the Global Financial Crisis through predictive modeling. He’s sounding the alarm once again and makes a keen (see what I did?) point about how the United States is going to have to deal with the fallout of the next credit crisis and mass worker displacement. No hyperbole. No histrionics. Just a casual observation of how we’re fucked and will require some form of universal basic income.
Watch: AI Crash Is Coming - Prof Steve Keen Exposes Looming Disaster |
This Week on the UNFTR Podcast |
It was a Show Notes catch up week for us. Headlines and current events, UNFTR housekeeping, listener notes and questions and Mets banter. We laughed. We cried. We told stories and knitted sweaters by the fire. |
Chart of the Week |
Watch Dec 18 The Bank of Japan (BOJ) is expected to hike rates again during its December meeting. It’s part of a new fiscal plan to reinvigorate the flagging Japanese economy, which has been struggling under low growth, negative interest rates and an aging population since the 1990s. Despite the attempts under “Abenomics” to encourage investment and growth, the Japanese economy was the engine that couldn’t. Things have begun to change. Japan is in a new determined period of growth. It remains to be seen whether the inflation they’re experiencing is the result of price pressure from demand or the hangover of imported inflation from the pandemic era. Any increase in Japanese bond yields could spell disaster for the United States. |
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Source: MacroMicro
While the Japan 10-Year bond yield has yet to reach the heights of the ‘80s and early ‘90s, it has returned to 2000s-era level (pre financial crisis.) The 10-Year is a double-edged sword in that it is a reflection of confidence and risk. A high yield typically means less faith in the institution issuing it.
So what’s with December 18? That’s the day we get new Treasury International Capital (TIC) data from the U.S. Treasury and the BOJ holds its FOMC meeting equivalent to determine the future of rate hikes. And it’s no longer a matter of “if” but “when and how many?”
And why do these events matter? The U.K., Japan and U.S. hedge funds domiciled in the Cayman Islands are the largest holders of U.S. debt. Hedge funds are buying treasuries to take advantage of the basis trade (arbitrage) in the short-term treasury market. If U.S. rates continue to move forward, these trades will unwind in short order. The U.K. holds our debt because they’re our bitches. Sorry, I speak the truth. But the Japanese (and others) have been also participating in a form of arbitrage known as the yen carry trade whereby they purchase a discounted yen, convert it to dollars and buy dollar denominated assets like U.S. treasuries. Well, the yen and Japanese bonds are on the rise, which means billions of dollars are being repatriated. Translation: Sell America, Buy Japan is on like Donkey Kong. |
Headlines |
Earth BucksAs part of our commitment to lean into more solutions journalism, Mother Jones just put together an article that highlights tangible ways you can support climate activist organizations.
From the article: “Here’s a list of eight of the most high-impact, cost-effective, and evidence-based organizations. We’re not including bigger-name groups, such as the Environmental Defense Fund, the Nature Conservancy, or the Natural Resources Defense Council, because most big organizations are already relatively well-funded. The groups we list below seem to be doing something especially promising in the light of criteria that matter for effectiveness: importance, tractability, and neglectedness.”
Mother Jones: A Dozen Ways You (Yes, You) Can Help Fight Climate Change
Education Is a Privilege and Not a Right in the U.S.We’ve tackled education funding extensively in the past. There are no good answers that involve local taxing districts funding public education because there will always be funding disparities between districts by definition. And filling those gaps with federal dollars will always be determined by how much of a priority education is at any given time. But vouchers and “school choice” also ain’t the answer because it diverts money from where it’s most needed.
From the article: “Any claim that allowing public tax dollars to be redirected to school vouchers is ‘about putting students first,’ as Duncan and Elzora say, is counterfactual. Students taking vouchers have worse educational outcomes. Private schools receiving public money are free to discriminate against students on the basis of race, ability, and/or LGBTQ+ identity. And waste, fraud, and abuse have always gone hand-in-hand with private school vouchers.”
The Progressive: States Should Reject Federal School Voucher Scheme
Semler Strikes AgainThe new National Defense Authorization (NDAA) bill was more than Trump requested. And when you put the fresh funds allocated in the Big Beautiful Bill Act that aren’t even included here it brings our grand military funding total to more than $1 trillion. We did it! And thanks to Stephen Semler we can see who voted for it and how much they receive from military contractors.
From the article: “On average, members who voted to authorize $901 billion in military spending received four times as much money from military contractors as those opposed. (This four-to-one ratio between yes and no votes holds whether you take the mean or median for each group.) I can’t imagine you’re surprised by the results. I’m not surprised, either: I’ve run this analysis since 2018 and found the same correlation — politicians voting to increase military spending taking more money from military contractors — every single year.”
Polygraph: Congress ignores public opinion, approves $901 billion military bill |
Resources |
Pod LoveJust a reminder that Best of the Left was the podcast that took a chance on us and put UNFTR on the map before anyone else gave us a shot! All hail Jay! and Amanda.
“Albert Einstein said, ‘Life is just like a game, first you have to learn the rules of the game, and then play it better than anyone else.’ (Or just get some insider knowledge about which team is paid off to lose and bet on the game rather than playing it, am I right?) Now, while it’s well known that sports gambling has great potential to corrupt the game, I’m sure being able to bet on literally anything in life all the time right from your phone with billionaires funding persuasion campaigns to convince you to do it will probably work out fine.”
Best of the Left Podcast: Life is But a Game (that you can now bet on)
Book LoveWas chatting with Unf*cker Bobby McD and he highly recommended this book after hearing us talk about Kathryn Bigelow’s A House of Dynamite.
“Nuclear War: A Scenario examines the handful of minutes after a nuclear missile launch. It is essential reading, and unlike any other book in its depth and urgency.”
Nuclear War: A Scenario by Annie Jacobsen
Unf*cker Comment of the WeekFrom @bionicmarx: “It is notable that you create space for Unf*ckers to actualize their own agency. As a fan of libraries, I might suggest a reminder to viewers that modern public library resources resemble University library resources, that are largely tax funded, freely accessible resources for public utilization. Your data, your analysis, your approach are all inspiring. Let’s keep it going. Thanks.” |
Progressive Corner |
Progressive Organization of the Week: The Good Food Institute.“The Good Food Institute works to make alternative proteins (think plant-based burgers) competitive with conventional proteins like beef, which could help reduce livestock consumption. It engages in scientific research, industry partnerships, and government advocacy that improves the odds of alternative proteins going mainstream.”
Check Out the UNFTR Directory of Progressive Resources for More |
UNFTR Member Question of the Week |
Question: If you could snap your fingers and have one of our 5 Non-Negotiables the law of the land, which one would it be? |
BluCrayons: Getting Money Out of Politics: Election integrity. I think if this one was magically fixed, it would make all the other initiatives infinitely easier to accomplish.
DaveFromHoldFast: Health care is a human right. Getting money out of politics would be huge for the country, but universal health care would save lives TODAY. |
KingMob: Climate action. Its going to be the hardest to achieve not just via the struggle against vested interests but will take the longest amount of time and sustained effort.
WildEyedBob: I think housing first should be first. We can help more people with other problems when housing isn’t one of the problems. Getting investors out of housing entirely would go a long way to making housing stability much easier to maintain. |
Current membership count: 611. Help us get to 700! Unf*ckers continue to bring the heat and support our work. Long after the close of the fall fundraiser and you continue to show up. Special thanks to our new and returning members of the week.
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