Joe Biden was handed a golden egg. He entered office after a near-total shutdown of the economy. Many businesses were shuttered throughout 2020. The GDP tumbled. In the second quarter of 2020, the GDP had fallen 32 percent. In the third quarter of 2020, the GDP had increased by four percent. Stimulus money was flowing into states in 2020.
By Biden’s inauguration in January 2021 the country was back from the dead. States with better governors realized that it was a massive mistake to close everything. Even states with fools for leaders were reopening. People were going back to work. All Joe had to do was stay in the basement, and stay out of the way. But he and the newly constituted Democrat majorities couldn’t leave the economy alone. They wouldn’t let it organically rebound as people and businesses returned to normal.
In total, over five trillion dollars was pumped into an economy that was already restarting on its own. It was gasoline thrown into a fire.
By late spring of 2021, most economists recognized that the economy was overheating. The Fed Board realized it but was slow to react. Treasury Secretary Janet Yellen said, in 2021, that she wasn’t concerned about inflation. Yellen saw the inflation spiral as merely “transitory.” It wasn’t. Inflationary increases in consumer goods continued through 2021 and into 2022.
To slow inflation, the Fed began signaling that it would increase the interest rates. It did and it did so dramatically. Yellen was wrong and she finally admitted it. In the summer of 2022, she said:
“As I mentioned, there have been unanticipated and large shocks to the economy that have boosted energy and food prices, and supply bottlenecks that have affected our economy badly, that I didn’t at the time didn’t fully understand. But we recognize that now the federal reserve is taking the steps that it needs to take.”
Since the beginning of 2022, the Fed has increased rates by 300 basis points.
March 2022: 25 basis points
May 2022: 50 basis points
June 2022: 75 basis points
July 2022: 75 basis points
Sept 2022 75 basis points
The rate increases have translated into dramatic surges in mortgage rates. At the beginning of 2022, mortgage rates were around three percent. They’ve steadily increased as the Fed has increased rates to slow inflation. Now, the average interest rate for a 30-year mortgage has topped seven percent for the first time in 20 years.
Last month, the median mortgage cost was $1,941. That is an increase of 5.5 percent from the month before. Since the beginning of 2022, the median house payment has climbed 40 percent. For the “median buyer” that translates into an increase of $6,696 over a year – an increase that many families cannot afford.
According to the Mortgage Banking Assoc.:
“Homebuyer affordability took an enormous hit in September, with the 75-basis-point jump in mortgage rates leading to the typical homebuyer’s monthly payment rising $102 from August,” said Edward Seiler, MBA’s Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America. “With mortgage rates continuing to rise, the purchasing power of borrowers is shrinking. The median loan amount in September was $305,550 – much lower than the February peak of $340,000.”
Seven percent isn’t a historical high. Not even close. In 1981, a 30-year mortgage hit its all-time high of 18.45 when the average home price was a little over $100,000. Rates dropped, but slowly. The lowest rates will ever get was likely reached in December 2020 when the average hit 2.68 percent for a 30-year loan.
Had Joe Biden and the Democrats allowed the economy to rebound organically, inflation almost certainly wouldn’t have spiked to a 40-year high. Had Congress been more prudent in printing money, Janet Yellen might have been right – inflation might have been “transitory.” But she was wrong. So was Joe Biden.
Biden continues to lie about the economy from inflation to what families take home in pay.
All Joe had to do was stay in his basement. He couldn’t even do that right.