Mortgage rates will not be coming down.

There is almost always a bigger picture if we will back up and look for it.

The bigger picture here is to realize that it was Federal Reserve policy that CREATED the bubbles in the first place – how the Fed reacts to the bubbles when they crash is not the most important thing to focus on.

Read “The Creature from Jekyll Island: A Second Look at the Federal Reserve”, by Edward Griffin. This book lays out how the Federal Reserve was created and why. The book then details how the banking cartel/Federal Reserve instigates wars because they are profitable.

Gotta run … will write more later

I have no trouble with the Fed response after 9-11. I have troubles with their responses to the East Asian problems of the mid-1990s, margin requirements in the 1990s

DaisyDuke – inflation is not a concern of the Federal Reserve – inflation is one of their main GOALS!!!

There are two ways that governments can pay for doing the things that governments like to do:

1) tax the citizens – this works well but can’t be done to excess because of things like the guillotine – ie, the
citizens eventually get fed up with being over-taxed and revolt

2) institute a fiat currency and print money as needed – this solves the immediate issue of how to finance government but it debases the existing money supply – every new dollar that rolls off the printing press decreases the value of all the other dollars currently in circulation – the debasement occurs very gradually so the citizens tend not to notice

Implementing Option 2, the fiat currency plan, is easier if you can also do these things:

> over-complicate the federal financing system so the citizens will choose not to dig too deeply into the details

> have public officials and academics poo-poo the idea that currencies should be backed by something tangible – hopefully the media will pick up on some phrase like “gold is a barbarous relic” and repeat it mindlessly to the unthinking population

> intentially remove all economic and financial material from the public education system

> get the citizens to believe that a small amount of inflation is acceptable and even desirable

> always present the spin that rising prices are being caused by greedy middle-men and speculators – never talk about how it is actually the slow, steady debasement of the money supply that results in rising prices

> manage the price of precious metals so they do not rise in the face of monetary debasement

> provide funding for economists who believe in Keynesian economic theory – grant them Nobel prizes if possible – do everything possible to support Keynesian economics while ensuring that Austrian economic theory is discredited along with that “barbarous relic”

~

Read “Creature from Jekyll Island” and you will see how all of this has been accomplished here in America.

Petrodollars & Goldman Sacks

Thanks Daisy for posting Mishkin's article… My thoughts are that BOTH commercial and residential real estate prices have been pumped up by-

•  low interest rates from 2001-2004 (courtesy of the Federal Reserve fighting the DOTCOM bubble the Enron/Worldcom collapse, and 9/11 market dislocations).
•  Exponential expansion of derivatives in the financial markets. (These instruments severely obscure the risks involved in mortgages and other commercial paper, allowing risky deals to gain higher credit ratings, and lower borrowing costs). This has allowed the proliferation of sub-financial, no down payment, and variable rate mortgages.
• Huge liquidity (dollar denominated cash) in the world market looking for a high yielding investment. ("M3" = all US dollar denominated money in the world market is currently increasing at over 10% per year). M3 has been increased to fuel the monopoly Petrodollar recycling scheme where virtually all world petroleum trade is done in dollars. The dollars that exporters collect need a home, and that has increasingly been US real estate, since it serves as a hedge against dollar depreciation.

All three of these phenomena are linked in a world financial system rigged to get the USA the oil it needs to import by manufacturing debt (the US current account deficit & and overhang of T-bills).

 My opinion is that the FED KNOWS that the US treasury has printed too much money, and that the SEC and the FED have not regulated the derivitive and private equity markets adequately…

 At this point, the FED can't lower interest rates because the US government needs higher yields to attract increasingly skeptical foreign investors to buy Treasury securities. If they don't, the government shuts down, or the Treasury prints more money and drives up inflation much higher than the +5% it is at right now. (Remember the 20% Fed interest rate in 1980 downstream of Vietnam war deficits and high oil prices caused by the Iranian revolution?).

 The Stock bubble burst in 2000, and the residential real estate bubble burst in 2006 are symptomatic of America's oil addiction and profligate government spending. HIGHER INTEREST RATES AND DOLLAR DEVALUATION ARE INEVITABLE!

The real reason that the FED doesn't pop asset bubbles, is that the Fed Governors are afraid they will cause a depression (because of the fragile condition of the US trade balance and government debt)… They don't want to be blamed for economic pain.