- There Is A Real Connection Between Our Substantial "Current Account Deficit And Low Interest Rates. A Large Current Account Deficit Seems To Have A Lowering Effect On Long Term Interest Rates Since Foreign Central Banks With Excess Dollars Tend To Buy U.S. Treasury Securities.
- However, Since The U.S. Consumes More Than It Produces, We Are Borrowing From Foreigners To Sustain Our Lifestyle. This, in turn, will lead to an equilibrium where developing countries' (China, India, etc.) standards of living increase as ours stagnate.
- Is the Mortgage Interest Rate of the Future Almost Here? (an adjustable rate mortgage without the initial low-ball rate)
- Cumulative real GDP growth compared to prior recessions is much less for this recovery, than in the 1960's (59%), 1980's (44%) , 1990's (47%), 2000's (23%) and 2010's (32%). This recovery may have a couple years to go.
- Looking at this CHART (14), you would have realized in 2004 that HOUSING prices were
raising at an unsustainable rate relative to incomes. Over the next few years, thru the
use of extraordinarily innovative financial vehicles blessed with over stated credit
ratings, billions of dollars worth of securitized mortgages were sold to investors.
A significant portion of these were Sub Prime, Adjustable Rate Mortages given to
unqualified home buyers and were embryonic DEFAULTS in the making.
- A premature recession,
- Huge Financial Institution losses and write-offs and Investor losses.
- Huge Financial gains by many of the top Managers and Traders who facilitated this
catastrophe even though many lost their jobs.
- Some of these Managers and Traders formed syndicates to buy up these same
depressed financials at Pennies on the Dollar and to make out again.
- House prices fell until their ratio to incomes returned to the
1980-1990 ratios. This took several years as incomes did not increase much over the inflation rate.
- Now in 2019, the ratios are high but sales volumes and interest rates are much lower.
-This CHART shows Real GDP and S&P500 growth after each Recession. Since the last Federal Government
-Administration was more interested in passing a Health Care Plan-good or bad- and the Federal
Reserve forced short term Interest rates to historic lows, the Stock Market was the only place to
invest. Longer term Bond investments will decline in value as Interest rates increase.The result of all this is a GDP growing at about two thirds of what used to be normal as this next CHART shows.