A while back we wrote about the market, not the Fed, raising interest rates. The Fed for what it's worth is a lagging indicator, always behind the curve.
They were behind the curve cutting rates when this whole mess started and they're behind now. Look at mortgage rates. The opening paragraph of a front page story in today's WSJ states: "A surprise spike in mortgage rates threatens to halt refinancing boom that has delivered strong profits for U.S. banks over the past two years."
Part of the the Fed's ploy to bail out the banking industry, an industry that still needs a real housecleaning since little has changed, was to convince regular folks all is well with the Fed on the scene. The housing market is about as close to ordinary folks as the White House is to Pennsylvania Avenue. Make no mistake, the Fed's being on the scene is the problem.
See the recent issue of Pimco guru Bill Gross' Investment Outlook. Gross points out interest rates nearly everywhere are lower than a duck's belly and the duck ain't looking too healthy either. For openers Gross cites the cost of money in the UK.
At 50 basis points short-term rates there, he notes, "are now nearly 2% lower than they have ever been, which is a long time." At no time during the last three centuries has "the Bank of England dropped rates below 2%."
For another view see "Landlord, Inc." in the latest issue of "Forbes."
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