Good News: Mortgage Rates and Gas Prices Falling
MP: Except for a four-week period in November-December 2009 when rates were 4.83%, 4.78%, 4.71% and 4.81%, the 30-year mortgage rate has never been lower than 4.84%, going back to at least the mid-1960s. The record-low mortgage rates should help keep the real estate recovery moving forward, and could also benefit homeowners who take the opportunity to refinance this spring or summer. The record-low 30-year rates are also more evidence that inflationary pressures are non-existent right now.
In other good news for American consumers, gas prices have fallen over the last two weeks by about 11 cents on average, which could act like a huge tax cut if the prices at the pump keep falling. For every one penny per gallon decrease in gas prices, consumers save between $1.42 billion and $1.71 billion annually, see this CD post for the math.
17 Comments:
I like Dr. Perry's unfailing optimism.
Thank you President Obama for saving our Economy !!!!
I'll will vote for you the next time around.
Many things may fall with mortgage rates and gas prices:
Prechter: Bank Reform Will Shrink Credit and Kill the Economy
May 21, 2010
Robert Prechter believes the measures (financial regulation) are doing the exact opposite of their intention. “Even though they (the government) want credit to expand, because that’s the base of inflation, they’re doing everything they can to restrict it.”
"On one hand we have the Fed trying to jawbone banks into lending but the government is doing everything it can to curtail the lending."
The Senate’s bill will mean smaller bank profits, which in turn means less money to lend. It also plays into Prechter's thesis that the economy is headed for deflation and depression.
Prechter coined the term "socionimcs" -- the belief social moods drives economic, financial and political behavior -- says it’s just the beginning of this movement. “All this behavior is classic, eventually we’re going to see an increase in protectionism," he says. "It’s just the way people behave. They can’t help themselves.”
They look low, but mortgage rates will go even lower.
Why?
A global glut of capital. High savings rates in the Far East and Europe mean the globe has oodles of money everywhere.
If you want safety--i.e. T-bills--get ready for small negative real returns.
Monetarists are constantly confused by this capital glut. They see higher gold prices and low interest rates, and assume the Fed is too easy. The Fed is not too easy, indeed while M2 is flat to down for the last 18 months, gold gas soared. The Chinese are buying gold with their ample savings.
Eventually, this capital glut will recharge the global economy--but capital chasing yield will also lead to some busts.
>"Monetarists are constantly confused by this capital glut."
You are aware, aren't you, that your hero MF was a monetarist?
Ron, "Monetarists are constantly confused by this capital glut" is an ignorant statement.
Greenspan's remarks:
Stability and Economic Growth: The Role of the Central Bank
November 14, 2005
"To date, despite a current account deficit exceeding 6 percent of our gross domestic product (GDP), we are experiencing few difficulties in attracting the foreign saving required to finance it, as evidenced by the recent upward pressure on the dollar. Of course, deficits that cumulate to ever-increasing net external debt, with its attendant rise in servicing costs, cannot persist indefinitely."
"Monetarists are constantly confused by this capital glut" is an ignorant statement.
Peak, yes I know. I was hoping Benji would try to explain it, thereby showing that he didn't understand what a "monetarist" is, and perhaps is not as familiar with Friedman as he thought.
This is a very costly recovery, because the government has one foot on the accelerator and the other foot on the brake.
The crude oil futures on May 3rd peaked at more than $87 USD. then on Monday 17th May the same contract had slipped below $70 USD.and currently looking to go down.
"
act like a huge tax cut if the prices at the pump keep falling. For every one penny per gallon decrease in gas prices, consumers save between $1.42 billion and $1.71 billion annually, see this CD post for the math.
posted by Mark J. Perry at 1:02 PM on May 21, 2010
Blogger Paul said...
I like Dr. Perry's unfailing optimism.
"
The magic of deflation should spread universal optimism. Unless you are one of the unfortunate companies that has become leveraged with debt.
Leverage is dead; long live the king.
Cash is king.
Ron, he doesn't know.
The Fed works in the future economy correctly, at least most of the time, while he presents hindsight incorrectly, at least most of the time :)
I love the persistent optimism. Mortgage rates and gas prices are falling because the economic contraction has caused demand to fall off a cliff.
From the Business Insider: The 13 Housing Markets That Will Never Recover
frank, I used to think the citizens of North Korea were putting on a show in public and were not actually true believers in the Dear Leader. During the last year, I've changed my mind.
For some extra credit, how about explaining to the class the role of the Fed, and your view of their various interventions the last 2 years.
BEANGEE
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Anon @ 12:36
I can't be sure, but I think frank forgot to use the >/sarc< tag.
Ludwig Von Mises :-"There is simply no other choice than this:either to abstain from free play of the market or to delegate the entire management of production and distribution to the government,either capitalism or socialism:there exists no middle way."liberalism.
Which road is China or America on????
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