If Helicopter Ben does what he promised, then we might see interest rates drop to under 5 percent.

If interest rates go to less than 5 percent, can he really be called “helicopter Ben” anymore? Didn’t he get that nickname because he threatened to crank up the printing press? That would be an inflationary scenario which would mean higher interest rates, not lower ones.

Besides, interest rates were NOT the driver in this bubble, it was reduced (actually, nonexistent) lending standards, nontraditional mortgage products and a complicit MBS market that flooded the housing market with weak hand buyers. This added an unsustainable and unnatural positive bias to the demand curve; with supply held relatively constant, prices went up. Once the bias is removed, prices will revert to their natural level.

Lowering interest rates probably isn’t going to have much of an effect at this point other than sending the US into bankruptcy even faster. Remember, the US needs to import billions of dollars every day just to stay afloat. The only way we can convince patsies, er I mean “investors” to keep buying our treasury instruments is by offering good interest rates. If they go much lower, the foreign capital will flee and the US will be doing a 1990s-style Argentinian tango.