See: Greenspan Says Deficits Could Lead to Higher Rates - Reuters WASHINGTON, March 2 (Reuters) - U.S. Federal Reserve Chairman Alan Greenspan on Wednesday said the current budget situation could be "fiscally destabilizing," harm the economy and lead to higher long-term interest rates. Rob Kirby, Commentary Sir
Alan of Greenspan:
The chief financial yogi of U.S.A., Inc. was at it again today in front of a Congressional Budget Committee in Washington. Paraphrasing -- his conundrum regarding long term rates had admittedly dissipated somewhat over the past couple of weeks, drawing solace from the rise in ten-year government bonds from roughly 4.00 % a couple of weeks ago to 4.38 % at the time of writing. "Honey, Who Swiped the Punch Bowl?" For those not paying attention, this significant rise in ten year rates is, in fact, a double edged sword; while higher rates are said to reign in inflationary pressures in the economy, they also cut the other way dampening enthusiasm in the refi trade and add to any prospective home purchaser’s anticipated monthly mortgage carrying costs. The refi/cash out trade has been the life blood of the American economy for the past couple of years [we could even say past several just to exaggerate a wee bit!] fueling consumer spending, while increased carrying costs serve to dampen the demand for the stock of new and existing homes. Any way you slice the fruit cake folks, rising rates are at odds with the mantra de jour - of American Dream Homes for all - at Fannie Mae [FNM – NYSE]. Not only that, the stock markets in general seem enamored with rising rates as well, as the DJIA made fresh 52 week highs just this morning as Sir Alan pontificated. We suspect that the folks over at the NYSE might just be drinking from the same cup as Sir Alan with all their seeming jumping jubilance in spite of and in the wake of rising rates! While rising rates may well have lessened Sir Alan of Maestro’s conundrum, in true Greenspan fashion, it has only served to inflate a new one [conundrum, that is] for us over here at Realty Reality, as we all have the urge to reach for our hard hats [that would be protection from falling real estate prices and flying punch bowls, ehhh?] -- until our state of the art crash helmets arrive from Sears Roebuck. Sears also guarantees these babies against Flying Pigs! Rob Kirby for Realty
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