I doubt that the Federal Reserve or the Federal government can do much to save housing for a confluence of reasons. The Fed can’t lower interest rates because were are so indebted to the world that we need higher rates to keep foreigners from pulling their money out of America.
We can’t do much more deficit spending to boost the economy because we are already, under a Republican administration, spending much more than we can afford. How much more deficit spending can we do?
The money pits that are Iraq and Afghanistan will continue to be there 5 to 10 years into the future.
American consumers are already so far in debt that they can’t borrow much more.
China, as a rising economy will compete with America as an investment destination. We will need to keep interest rates high to keep money coming here.
We need a strong dollar (i.e. high interest rates) to import ever more expensive oil.
We did not invest much in education in the last 20 years so future productivity improvements won’t be so technology driven. Remember the Internet comes from research that began in the 1950’s and 1960’s. I’m afraid that Chinese and Indian engineers will be able to match our own engineers so we won’t own future technologies and therefore won’t have competitive advantages.
As much as I hate to think about it, I’m afraid that Thomas Friedman is right. Unless we start investing in intellectual knowledge now, we stand to loose our technological and economic supremacy. If we are complacent, it’ll happen slowly and it’ll be too late to reverse course.
I would not be suprised to see mortgage rates go to 10% or the low teens within the next 10 years.
