First, Happy Halloween.  I hope everyone has a safe and fun Halloween.  The pic above is yours truly in a blow-up dinosaur costume I got for 25 dollars.  Quite a steal!  It is crazy to think that my purchase has changed the world and your Halloween costume likely has too.   It is hard to imagine that we are transforming the economy with a simple purchase of a blow-up dinosaur that is hard as hell to walk in 😊

What does my dinosaur costume have to do with rates?   Most people incorrectly think that the federal reserve “sets” consumer rates (like cars, mortgages, etc.  The federal reserve only sets very short-term rates via the federal funds rate.  This is the rate that banks utilize to make loans to each other.  This doesn’t have a direct impact on long term rates.  These rates are driven by market perceptions of future inflation, economic growth, etc.…

How is a costume changing rates? One of the largest drivers of inflation (which drives rates) is the cost of goods sold.  Basically, in an inflationary environment you pay more for goods as prices increase.  My dinosaur costume at 25 dollars is quite a steal.  How is it so cheap?

In a nutshell, my costume is indicative of the supply chain efficiency that is taking place now keeping prices low.  I’ll term this the Amazon effect.  Ten years ago, to get a costume you went into a store, tried on a bunch of costumes and walked out with one.  This same costume would have been double the cost as today.  Now, I went on Amazon saw who the cheapest provider was (I’m not looking for daily long-term usage, it would be a little weird driving around in a blow up costume looking at real estate) and two days later it was at my door.  I spoke with no one and they sent it from some warehouse when I requested it.  It wasn’t sitting on a shelf in a retail store that is paying rent, sales clerks, taxes, lights, etc… Essentially one step out of the supply chain was eliminated along with the margins that were charged.

Why is this so important?  Although I think I look “sharp” in my dinosaur costume and got rave reviews from random folks when I wore it, how does this really make an impact on the world?  This supply chain impact has morphed from consumers to businesses.  Before if you owned a shop that made a widget and you needed supplies, you likely had a salesperson that serviced your business and was familiar with the widget business.  One of the largest players in this space was Grainger, a business to business supplier that had awesome margins since they were one of the few suppliers of parts for the widget machine that a business owned.

The world changed!  In 2005 amazon bought a business called small parts that supplied industrial parts to various business customers.  Nobody blinked an eye; how could a “book company” upset established b2b companies?

Fast forward 12 years and Grainger and others are sweating.  A report by Goldman Sachs found that Amazon and Grainger both carried 98 of 100 products that Goldman sampled. Of that, Grainger’s prices were at a 55 percent premium to Amazon. It also found that Fastenal was at a significant premium of 49 percent.  Why would a business customer pay 55 percent more to buy a part for their widget from supplier x than y?

They will not as the part is a commodity. The Amazon effect is overtaking the business to business marketplace driving prices down.  This seismic shift in pricing ability has rippled through the economy.  As mentioned above inflation is driven by increased prices.  Prices are only going down from here.  As businesses shift to lower cost suppliers they will eliminate a 55% premium on their supplies which can be passed on to consumers in the form of lower prices or services.

This lowering of prices will keep inflation down and long-term rates low.  This phenomenon is only beginning as Amazon and others take aim at the middle man in other industries like groceries (Amazon bought Whole Foods), appliances, etc…   All of which will bring prices down throughout the economy.  It is nuts to think that a blow-up dinosaur costume picked out by my 4 and 7-year-old has transformed the world.  The federal reserve should trade in their suits for a blow-up dinosaur costume; this would be considerably cheaper on their wardrobe budget and help keep everyone’s rates low.


Written by Glen Weinberg, COO/ VP Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.


Fairview is a hard money lender specializing in private money loans / non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. They are recognized in the industry as the leader in hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide.  To get started on a loan all they need is their simple one page application (no upfront fees or other games).