Warning: Controversy Below - Raise the Fed's Discount Rate NOW!!!

[Edward Briley]

I am someone that have flipped several homes in my life, and now I can see where it is time the raise the interest rate at the Fed's Discount window.

By doing this will increase home values, and cause more homes to be sold. Now at this time I can hear all of you fuming – Why does this idiot think this way? The reason is because when I bought my first home it was at a 13.5 percent interest rate. After owning the $52,000 home for 3 years I sold it for a profit, and received a $2000 profit. Someone assumed the loan for the home, and today that home is valued at $220,000. Did low interest rates boost the cost of the home? No, the home increased in value for the opposite reason. Actually the home is decreasing in value now, because of low interest rates. It is simple. The community the home set in (even though an historic area), improved. People bought the surrounding homes using creative financing, and loans from the city etc... to fix up the homes. Even with that being said the low interest loans were no less than 4%.

Now by raising the Fed's discount rate, will create a surge in real estate sales. Working people will have more money, and will upgrade their housing.

• I am really hearing how much of an idiot I am now. Yes, I know I am a stupid prick, only concerned about myself? I can hear, “listen you prick, how can this help a first time home buyer with a low income buy a home?”

First of all I am the opposite. I fully support first time home buyers, and think they should have an advantage in the market. Raising interest rates does a couple of things:

First thing you will see is salaries will rise. Now for all of you real estate agents out there, do you really think people will stop buying homes? No, what will happen? A lot of the population in the country will put a “For Sale” sign in their front yard. The reason is simple, the smart people refinanced their homes to for a low interest rate? Now you have $200,000 or above homes setting for sale, at a 3 to 5 percent interest rate. Total payment of home is around $1200 to $1400 a month.

Now you have someone looking for a home, they will be looking for an assumable mortgage, seeing how being able to buy a home with a low interest mortgage is the prize. They will have sums of money to to put down, rather than a few thousand. This alone drives up the cost of real estate.

Now many of you are going to say “people ain't got no money”. Listen Real Estate agents you will be making bundles, and all this will do is to drive the economy upward, and this means higher wages for everyone.

Now the question "Where are the bundles of money going to come from?" Simple, people have thousands of dollars setting in their savings accounts, money market accounts etc... that are producing close to a zero percent interest rate. Why? Because that money is secured and is FDIC insured.

Now think about this, that first home I had now has a 3.5 percent interest rate on it. The total payment is $1350 per month. The owner may wait for a day or 2 to put it up for sale, but within 90 days I would be willing to bet that same home will sell for $260,000 to $280,000. The owner of the home will most likely take the profit from that home and put down a deposit on a more expensive home, assuming the loan. Now I am going to hear the following – Well the owner has only made $20,000 in profit on the home? How can he do this?

This is a situation maybe most of you real estate agents do not understand. When interest rates increase, what happens to retirement accounts? The interest on this money falls like a rock, that is what happens. Many people have money setting in 401 accounts etc... that are making money hand over fist, sorry to say not many real estate agents do. Now when you could borrow your own money without any penalty at a 5% interest rate, that you are paying yourself, and you could afford to do so, the question is easy, should you? Now the $20,000 comes into play. Remember the discount rate? Now that $20,000 could be easily invested, rather in CD's from banks etc... to cover the interest on that 401K loan. This also gives padding to someone that gets that higher interest rate, or taking over a mortgage, using the 401K loan.

  Basically the buyer can buy a much more expensive home, and make the money back on the rear end.

Now there are many reasons to raise the Fed's Discount rate than what I have mentioned above. Now I expect a lot of feedback from this “Calling me names” etc... However, I survived and bought homes in a high interest rate environment, and prospered from it. Sorry to say, it difficult to do it today, without a lot of effort and risk to do so. I am waiting on your comments. Small business drives the US economy not major corporations.