In a striking revelation from Steno Research, macro expert Andreas Steno details an emerging strategy from Freddie Mac that could potentially inject trillions of dollars back into the U.S. economy. According to Steno, the pandemic's "excess savings pool" in the U.S. has effectively disappeared, setting the stage for strategic financial maneuvers.
Freddie Mac is considering a bold initiative to buy back closed-end single-family mortgages when it already owns the corresponding first-lien mortgage risk. "This could realistically unlock between $1.5 to $2 trillion in consumer spending, tapping into the nearly $11 trillion in excess equity from the U.S. housing market," Steno explains.
The proposal comes at a time when the U.S. housing market is experiencing a slowdown in activity due to homeowners reluctant to move or refinance because of rising interest rates, a phenomenon Steno refers to as the "golden hand-cuff" syndrome. "The available equity is substantial, but frozen under current conditions," he notes, suggesting that Freddie Mac's move could revitalize market dynamics significantly.
This strategic financial adjustment could not only stimulate substantial economic activity but also influence inflation rates. "Unleashing such a significant amount of spending power into the economy could have inflationary effects, especially given the current state of financial liquidity and growth trends," Steno adds.
Steno also contrasts these trends with European data, notably from Germany, where the excess savings situation appears less dire. This discrepancy underscores differing fiscal impacts and potential responses between the U.S. and Europe.
The proposal is still under review, with a public comment period ending soon, but its implications for both the housing market and broader U.S. economy are profound. As Steno concludes, "We're on the brink of potentially transformative economic policy that could redefine consumer spending patterns and economic growth in the near future."