2bz

We May See Mortgage Rates Fall to 3.5%

"No one" in the U.S. will hold the mortgage to maturity. Let's not kid ourselves; that would be the rational thing to do. If the Fed succeeds in reinflating the housing market people will be itching to ditch their properties at "break even" and get into "bigger and better" properties as long as they will be able to cover the payments for some time. The average time people hold on to their residences is 7 years AFAIR. I think that the banks will be OK as long as the inflation does not get too out of hand, i.e. banks refi mortgages at 3.5% now and get paid back when interest rates reach current levels ~5%, provided a healthy or newly exuberant housing market.

Also, if people don't have incomes, they will not be able to refinance unless lenders continue to offer "liars' loans".

The best, but not a short term, solution to our problems is to figure out how to flip the tables on the rest of the world and in particular on Asia. Namely, find goods or more likely services which we can provide to the exclusion of other countries for which there would be a high demand and which we could manufacture/provide relatively cheaply. Our business people and lawyers are increasingly working in places like Abu Dhabi is an excellent start. Obama's plan to reinvigorate our scientific research may be a good idea too in the longer term, provided that we succeed.