There have been many promises by President Obama, Congressional leaders, and other politicians that they were working on a Plan to reduce mortgage rates. The FED has been purchasing Billions of Mortgage backed securities in the HOPE to reduce rates.
However, rates have continued a steady march UP since December 2008 !
Why are investors and lenders raising rates? The spreads that investors are demanding for mortgage backed securities continues to grow—investors still do not trust the viability of loans, because home prices continue to FALL throughout the US. Even the Northwest, which resisted home price declines in 2007, has shown large declines in 2008 due to more layoffs. Unemployment rates in the NW have risen to over 7% in the past few months. Even Boeing has lost tremendous amounts of money because of their strike last year, with some people predicting that Boeing will go the way of the automakers due to increasing costs.
Supply and demand states that as we sell BILLIONS of treasury bills to pay for our increasing enormous deficit spending, RATES have to increase to entice more investors world-wide to buy our Bonds. Right now we are lucky, we have the rest of the world in severe turmoil and recession. The US is the only STABLE currency in the world, so demand stays artifically high. We just showed the world that we can make peaceful changes in government — other nations are on the verge of collapse because of financial strains. Some say Mexico may collapse soon.
Even though we have 3.7 million out of work, China has 10 to 20 million on the street (with no welfare or unemployment). Russia is talking about letting half of its 1100 banks just fail — no more government aid.
So as bad as things are here in the US, we have a stable government and plans to keep the unemployed happy with more unemployment benefits from the taxpayer.
However, what happens when we increase tax brackets on everyone in 2010, and the US is not out of the recession, we are spending a tremendous $850 TRILLION in stimulus taxpayer debt, and the rest of the world is coming out of recession without the burdon of a gigantic National debt?
Does anyone remember the 15% interest rates of the early 80’s? Mr Volker, who got us out of the last super inflation cycle in the 80’s, was appointed as an Obama advisor===but recently complained that no one is listening to him or taking his advice on the new Obama team! This is not a good sign to the markets.
I was disappointed to hear Obama say during his press conference that their is no PORK in the Stimuls Package, when even his own Democrats are squirming over all the social spending that was put in by Pelosi and Daschle(before he quit over tax issues). Obama is a great speaker, but he cannot pander to the American Public, because the TRUTH does eventually come out.
What is this talk about shutting down talk radio under the “fairness act”? We need to hear both sides of issues.
Camille Paglia points out: “One of the nuggets I’ve gleaned from several radio sources is that Michigan Sen. Debbie Stabenow, who has been in the aggressive forefront of the campaign to reinstate the Fairness Doctrine, is married to Tom Athans, who works extensively with left-wing radio organizations and was once the executive vice-president of Air America, the liberal radio syndicate that, despite massive publicity from major media, has failed miserably to win a national audience. Stabenow’s outrageous conflict of interest has of course been largely ignored by the prestige press, which should have been demanding that she recuse herself from all political involvement with this issue.”
http://www.salon.com/opinion/paglia/2009/02/11/stimulus/
What has this to do with interest rates? We must have TRUST that everything Washington does, is presented to the American Taxpayer correctly. Investors world-wide must trust US to tell the truth, or they will quit buying our DEBT. What happens when the rest of the world recovers without the tremendous DEBT that are heaping on ourselves? Will we try to spend our way out of recession and drag this on for DECADES , just like JAPAN? Please read my other Blog http://bobstakeon.wordpress.com/2009/02/11/
Todays Treasury Bond sale came out OK today, but rates are NOT going down. I have to REFI myself this year, I just hope that I did not wait too long. The more I read and hear, the more it looks like Government as usual. This is not what we hired Obama to do—I hope after he gets through this Stimulus MESS, that he really does get opportunity to fix things. I think we all realize that there is no way mortgage rates will get lower by anything the FED can do — we need to restore confidence in our government. NO more days where Obama promised a detailed plan by Geithner during a press conference and then Geithner shows up the next day before Congress with NO PLAN details and the stock market tanks by 381 points! We need to see that the new OBAMA administration knows what to do, besides spending us into national bankruptcy. Would you invest in Treasury Bonds at very low interest rates?
