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I stole my subject line from the 1985 Simple Minds song – Don’t You Forget About Me…

OK – they might have actually sung “‘Rain’ keeps falling…” but I was an economics-obsessed econ major, so I heard “Rates.”

Because rates were falling! From almost 18.5% in 1981 all the way down to 12% in 1985!

So, it is no wonder the economy was booming back then – a 6% drop of rates can do amazing things for an economy.


The Fed is in a pickle because it can’t raise rates or even allow rates to climb now for a variety of reasons.

In January I blogged about why I was so wrong when I predicted rates would increase. The reasons included a weak world economy, the Iran skirmish, the Coronavirus, weak trade deals, quantitative easing, and tame inflation.

But there is another long-term trend here too – the Fed can’t let rates increase b/c when rates go up asset values go down, putting huge pressure on an economy that now depends on inflated asset values (assets include both stocks and real estate).

In addition, when rates go up, the dollar gets too strong and this makes American exports less appealing (more expensive to foreigners) – again threatening the economy as a whole. And finally, our gov’t is so deeply in debt that it too now depends on low rates to keep deficits somewhat manageable.


  • 1985: 12.4%
  • 1990: 10.1%
  • 1995: 7.9%
  • 2000: 8.1%
  • 2005: 5.9%
  • 2010: 4.7%
  • 2015: 3.85%
  • 2020: ??? (I will predict 3.5% or lower)


  1. Continued Low Rates: Rates could now very likely continue to fall for the next year or two, and even fall sharply if recession signs surface as many pundits predict will happen later this year.
  2. Refi’s Clogging Production Lines: With millions of borrowers now eligible for another wave of refinances, many lenders will experience clogged production lines – lengthening closing periods and impairing service levels. I should add here that JVM has ops centers dedicated to purchases solely to ensure that we can maintain our promised service levels.
  3. Booming Real Estate Market: Lower rates improve buying power, stimulate more demand for housing, and help inflate housing values. Hence, lower rates in combination with our current demographic trends (millennials getting married and having babies) will likely create or continue (depending on location) another real estate boomlet that should last for a few years at least.


My caveat of course is the possibility of “Black Swan Events” or major economic or financial upheavals that nobody sees coming. The concept was made famous in Nassim Taleb’s famous book of the same name – The Black Swan.

Now that Central Banks are meddling so much in every major economy across the world, black swan events are more likely than ever, so expect the unexpected.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646

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