Some of you may have noticed that mortgage rates jumped up in the last few days as long term treasury yields began to rise. Obama just doesn’t seem to understand that he can’t just wave his hand and the laws of economics will obey his voice. Maybe he thinks the economy will obey him like the dogs he took back to the White House. “Sit interest rates, sit.”
The huge spending spree Obama is undertaking means the Treasury has to float trillions of dollars of debt in the next few years. Since investors are wary of inflation, treasury yields are rising. Treasury yields, in turn, help determine mortgage rates. Higher yields, higher mortgage rates.
Obama wants to reflate the housing bubble and the economy so he borrows billions of dollars. Obama’s borrowing causes inflation fears and higher interest rates. Higher interest rates kill housing and economic recovery.
A 0.10 percent rise in mortgage rates is equivalent to a 1% rise in home prices. Obama wants everybody to refinance their home, but if rates keep rising because of Obama’s borrowing, nobody will be able or want to refinance. Obama is shooting himself and the rest of us in the foot.
Oh yeah, of all the illusions that Obama puts on, even he, the master of illusion, won’t try to pretend that he could balance his absurd budget. The best illusion anyone, if anyone, will believe is that he will halve the deficit. I don’t buy it.
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The \halve the deficit\ is such a joke. That’s like saying youre going to gain 400 poinds and then lose 200. Well you are still +200. Even if he reduces the deficit by half, it’s still more than it ever was under W. Mortgage rates are a serious problem. The 10 year yield has gone from under 3% to 3.75% in a couple weeks. That’s a huge move and is threatening to derail any kind of recovery. Your points are right on.