Why Ockham’s Razor May Be The Reason Mortgage Rates Are Still Low

• Tweet

The Chicago Tribune's Rick Morrissey wrote a piece about steroids in baseball this week.  In it, he talks about the 1990s and how many home runs were being hit.  At the time, writers concluded that the baseballs were "juiced".

A few of the theories floating around at the time were kind of bizarre:

• The economy was good in the Dominican Republic and so the people were happy.  Because they were happier, workers were winding the baseball's core a little tighter, which caused the ball to jump off the bat faster. 
• Colorado's thin air contributed to the uptick in dingers.
• Weather patterns and El Nino caused a change in the jet stream so that baseballs get held up longer (and always out towards left-center).

And that brings us to Ockham's Razor.  Ockham's Razor states that the simplest answer is usually the right one.  According to this theory, the real reason why so many home runs were hit was because athletes were cheating.

Stories like this tell us a lot about Human Nature.  Even though the answers to our most burning questions can be in front of our faces, we ignore them because they're not the answers we're looking for.

So, let's relate it to mortgage rates because I read a lot of news sources every day. 

To hear the experts tell it, inflation is not impacting our economy because of this reason, or that reason.  It's a natural progression for the economy, they tell us; data is cyclical and we're on an uptick.

At face value, though:

• Yes, consumers are experiencing rising costs. 
• Yes, businesses are facing higher material costs. 
• Yes, the real cost of borrowing money is higher. 
• Yes, labor markets are tightening.

And yet, writers ignore these signs because inflation is the ultimate economic evil in America. 

Inflation is the answer that nobody wants to hear.

So, Rick Morrissey tells us the story of how baseball writers blinded themselves from the truth because it wasn't the answer they wanted.  Instead, 101 theories were tossed out for public consumption.  In hindsight, it should have been obvious. 

Someday, I can't help but wonder if we'll all feel the same about the economy.

Sources
It's naive to think cheating's out of baseball
Rick Morrissey
Chicago Tribune, Friday, April 14, 2006

http://www.chicagotribune.com/sports/columnists/cs-060413morrissey,1,5926154.column?coll=chi-sportscolumnist-hed

Ockham's Razor
Wikipedia
's_Razor