By: Shmuel Shayowitz

Joe Schmoe replaced all the windows in his house. He had top-of-the-line, double-insulated, energy-efficient windows installed. A few weeks later, he received a bill from the company, which he immediately threw in the trash. Sixty days later, another invoice arrived, which he promptly tossed. At the six-month mark, a letter with a pink insert stamped “past due” came, only to be thrown away instantly.

Every thirty days for the next few months, Joe started to get calls which he ignored each time. One day his phone rang, and Joe saw the contractor’s name on his Caller ID. This time he picked up. The voice on the other end started to scream and curse at Joe. “Mr. Schmoe, the work has been completed over a year now, and we still haven’t been paid!”

Joe calmly replied, “Now, don’t try to pull a fast one on me. The salesman who sold me those windows explicitly told me that they would pay for themselves in one year!!”

If only paying bills were that simple. Experts across the globe are sounding the alarm and advising consumers about an upcoming (or already here, in my opinion) recession. The most significant piece of advice that I have seen is to “start saving” and “have a reserve.” For many, that’s easier said than done.

In a recent Harris Poll and Personal Capital report, almost 60% of Americans would not last three months without a paycheck should employment conditions deteriorate, and job cuts accelerate. Unfortunately, I anticipate that to be likely as The Federal Reserve already indicated that their rate hikes would persist despite the damaging impacts on employment and housing. Unfortunately, the massive surge in credit card debt shows that many Americans are running out of money a lot sooner than expected.

Well, guess who else has started to run out of money? You might be shocked to learn that The Federal Reserve and many other Central Banks worldwide are now “in the red!” You read that right! Per public information posted by The Fed, Fed remittances owed to the U.S. Treasury reached a negative $5.3 billion as of October 19.

As reported by Bloomberg, The bond market is enduring its worst selloff in a generation, triggered by high inflation and the aggressive interest-rate hikes that central banks are implementing. Falling bond prices, in turn, mean paper losses on the massive holdings the Fed and others accumulated during their rescue efforts in recent years.

This is a massive swing from the positive figures seen as recently as August when the Fed was not showing any losses. The markets are not in a free-for-all, however, because unlike what Americans can do, The Fed merely creates an “IOU” to the Treasury that would be repaid via future income. Regardless, you can understand how this is not the proper way to run a country, to say the least.

This week The Fed hiked rates another 75 basis points. I know many of you are tired of hearing about it. Believe me; I am tired of writing about it. Unfortunately, this fourth straight, historic rate hike will immediately impact anyone with debt that is not “fixed.” That said, I think there is good news ahead, however. The “Core” inflation reading The Fed uses to analyze inflation relies heavily on “shelter” inflation which is old data.

I think inflation will ease, and I believe December might have one last 25 or 50 basis point hike before the Fed stops. I also think, while the Fed won’t be “printing money” for a while, they will come up with new “creative” ways to prop up the banks and wall street companies, which will usher in a new era of monetary easing, and rates will ultimately drop again!

Shout out and a very special happy birthday to my incredible wife Esther.

Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at Shmuel@approvedfunding.com.

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