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With interest rates being kept artificially low, I would think that sooner or later, market forces would start to keep in and unleash the compressed spring, known as interest rates. I'm just wondering what the catalyst is likely to be. I for one think China dumping their holdings of US Treasuries could do the trick.
With interest rates being kept artificially low, I would think that sooner or later, market forces would start to keep in and unleash the compressed spring, known as interest rates. I'm just wondering what the catalyst is likely to be. I for one think China dumping their holdings of US Treasuries could do the trick.
Depends. How much will da guberment tax and how much of it will the Fed buy? How much demand for housing and mortgage debt will there be if the only other people who would buy the house has no money? How much the dollar is worth is not the issue. The issue is how hard are they to get verse what they are worth. If Americans can't get the dollars while they are flooding in to buy things up then well , not so good. One thing I do know is we don't import land. That could be cheap, but then there are already plenty of cheap places to live.
Thats exactley what happened at the start of qe2. Bond investors were scared that qe2 would be inflationary and despite what the fed wanted they bid rates higher.
It wasnt until a few weeks in that rates came down again.
No one knows how the investors of the world will perceive the future and whether they can wrestle rates away from the fed and bid them higher again.
Thats exactley what happened at the start of qe2. Bond investors were scared that qe2 would be inflationary and despite what the fed wanted they bid rates higher.
It wasnt until a few weeks in that rates came down again.
No one knows how the investors of the world will perceive the future and whether they can wrestle rates away from the fed and bid them higher again.
Is it possible to see them rise? for sure.
Here is what it does when there is no significant equity in asset prices and no wage buying power:
Inelastic "macaroni and cheese" prices go up because the relative cost of production with expensive asset prices will raise the value of the property a mac and cheese factory. It will also shift more demand for the cheaper good. This is what makes people scream "inflation".
The part the "inflation alarmists miss is how its paid for. To pay for the inelastic demand like basic food then some luxury will slacken in demand like middle class housing where another crowd of people will scream "deflation".
It will then simply settle in for higher prices for basics while cutting back luxuries in an economic reorganization. The rich get bargain prices for luxury once in the reach of the middle class.
It all comes down to right now food ,energy and healthcare is sucking away what little money we have to spend from our wages.
Thats at the expense of all the other sectors that are weakening.
Its the FIRE sector. To a lessor extend health care monopoly and the oil cartel but they do not hold a candle to the FIRE sector which makes absolutely thing except debt. All those goods and service you mention create employment. Rising asset price just add dead weight costs which locks up the economy.
listen to the FED (not these guys above) that their goal is to lower the mortgage rate.
the mortgage rates are based on 10 year Tres. its at 1.64 or so. however 30 year is at 3.25 (lowest i am quoted). that means there is a big spread between 10 and 30. the spread will collapse after the election for sure.
i am quoted 2.25 for 7/1 arm and 3.25 for 30 year. closing on nov 15th. as of now i am not locking in rates.
listen to the FED (not these guys above) that their goal is to lower the mortgage rate.
the mortgage rates are based on 10 year Tres. its at 1.64 or so. however 30 year is at 3.25 (lowest i am quoted). that means there is a big spread between 10 and 30. the spread will collapse after the election for sure.
i am quoted 2.25 for 7/1 arm and 3.25 for 30 year. closing on nov 15th. as of now i am not locking in rates.
And the banks are making a killing on that spread. Estimates are that they will report profits near 20% in their next quarter.
Bank profits rebounded in third quarter - The Term Sheet: Fortune's deals blog Term Sheet
Mortgage bond rates, which is essentially what the banks have to pay to fund, these days from the government, home loans, have dropped much faster than actual mortgage rates, which is what consumers actually have to pay. That's opened up a huge spread between those two rates. It's nearly three times as large as usual, which essentially means banks are making nearly three times as much. "Mortgage spreads are 80 basis points larger than there were just a few months ago," says Bove. "That's just pure profit."
It's almost guaranteed because the United States, as a signator to the IMF, is required to participate in tough new regulations that will bump up credit costs an estimated 26 basis points in this country.
With interest rates being kept artificially low, I would think that sooner or later, market forces would start to keep in and unleash the compressed spring, known as interest rates. I'm just wondering what the catalyst is likely to be. I for one think China dumping their holdings of US Treasuries could do the trick.
Rates vary daily. It is highly unlikely you'll see a change from 3.500% to 5.500%. However, 0.500% - 1.000% do happen, depending on the program.
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