Krugman: Questions of Interest

[salin]

http://www.nytimes.com/2004/04/20/opinion/20KRUG.html?th

By PAUL KRUGMAN

Published: April 20, 2004


Yes, the republic is in danger," a friend said. "But what's going to happen to interest rates?" O.K., let's take a break from politics.

Over the past two years, interest rates have been very low. Last June the 10-year bond rate hit a 48-year low. Even three weeks ago the rate was still below 4 percent, a level last seen in 1963.


If the economy fully recovers — or even if investors just think it will — interest rates will rise sharply. In its World Economic Outlook report, to be issued tomorrow, the International Monetary Fund urges the Federal Reserve to prepare the economy for higher rates to "avoid financial market disruption both domestically and abroad."

But how far will rates rise? Let's not get into Greenspan Kremlinology, parsing the chairman's mumbles for clues about the Fed's next move. Let's ask, instead, how much rates will rise if and when normal conditions of supply and demand resume in the bond market.

more...

[eileen from OH]

1. God bless Krugman. . .

Based on an article he wrote months ago, warning about interest rates, Mr. eileen and I finally got around to re-financing - with a fixed rate. A nice, low fixed rate.

eileen from OH

[papau]

2. Krugman writes the way I wish I could - 7% 10 y rate/8.5% mortgage

coming soon.

He must be smart because we agree!

:-)

[NJCher]

3. heh

I'm at 5, fixed.

Reading between the lines, it looks like a big fat interest rate increase will be the reward if our fellow dufus Americans elect bush as president.

For now, America gets the benefit of the doubt, but if financial markets decide that we have turned into a banana republic, the sky's the limit for interest rates.

If bush steals or wins the election, that is sure confirmation to the world that we are indeed a banana republic.


Cher