[quote=KIBU]My question to all of you is how long do you think the Fed can keep rates this low: months, years ???
We can’t deny that the rate change is a huge factor in bringing down the purchase cost significantly. In more cases, my opinion is that you start to see more economical sense in purchasing. Of course why now when you can still wait and minimize your risk.
Anyway, what’s your opinion on when or what factors will make the Fed having to abandon this bottom rate and increase the rate. After all, come back kid Voelker is coming back. [/quote]
Despite all the doom and gloom, I still believe in the business cycle. This will likely be the worst recession in most of our lifetimes. But, just like the boom ended when it exhausted itself this bust will end when it exhausts itself and the recession will die of natural causes.
Typically the Fed responds late to economic recoveries. We could be recovering by Sept 2009, but the Fed (and most folks for that matter) will not recognize it until many months or up to a year later later at which point they will consider rate changes again. I think they would need to see a combination of a recovering economy and clear evidence of sustained inflation.
Digressing further… at that point they will once again be behind the curve and a series of rate increases will be needed to quell inflation. Eventually inflation will be curbed when the business cycle moves down again. At that point, 10-15 years from now people will be bemoaning the end of Western Civilzation for the 4th time in my life **
** The other times being ~1974-1975 (Oil shock and ensuing inflation turns the US into a third world nation), 1989 (Japan is the next Superpower, “all your real estate are belong to us”, making US slaves to Asia), 2008-2010 (Housing bubble bursts and ensuing recession turns US into a third world nation)
