Stockman confused me when he stated rates are going to go up in 2 years which will pop the whole bubble including the new housing speculation, but at the same time we`re beginning a currency war which means rates can go into negative territory.
Any thoughts ?
I am no financial whiz, but it seems I’ve been hearing “interest rates HAVE to rise” for about ten years now, and I’m still earning about the same rate at my bank as my mattress would pay.
I’m of extreme opinions on this stuff.
Under no circumstances will Bernanke allow rates to rise. The entire QE mechanism is designed to bring rates down. It’s not just a question of how many bonds he buys. It’s also a question of what price he pays for them. There is nothing to stop him from getting a quote from the Primary Dealer and then saying, nah, I’ll pay a higher price than that quote (higher bond prices drive yields down). The PD is not going to say no to a customer that is willing — demands — to overpay.
And so rates will go down. In fact, I expect negative rates within a year or two. As for what this does for housing — nothing. If mortgage rates were zero, people still would not buy houses. It’s an illiquid asset, and banks are not anxious to lock in 30 year loans at nearly 0%.
Frankly, I think the direction for society is down, more or less forever. It is driven thus by oil scarcity and the energy required now to get energy out of the ground. That ratio has exploded. We used to just build a little 30 foot derrick, drill a hole and put oil capture piping over the gusher. Now we build a 40 story tall structure, in parts, ship them to the coast, assemble them at sea, put a 20,000 horsepower marine engine on it, helicopter a crew out to it, drive it 6000 miles and then drill in 2 miles of water to the seabed, and 5 miles under that. Then we try to get capture infrastructure in place hundreds of miles at sea.
THAT is why civilization is disintegrating. The energy ratio has gone to hell — and it’s never coming back.