Will an interest rate cut by the Fed on Tuesday cause the housing market to change gears? Can a quarter point or even a half point reduction in the base interest rate reinvigorate an economy that's been limping along for the last three quarters? Would our nation's bankers have reason to smile if their cost to borrow declined just a bit?
Don't make me laugh.
At the risk of causing my photo to be placed on a milk carton, I'm going on record as stating my opinion that we need another half point increase in the cost of borrowing in order to gain some manner of control over our current liquidity crisis. This nation's economy is going through something similar to the flight of a flak riddled B52 bomber, on fire with three engines shut down. Yeah, it'll still fly but it's not real graceful and it looks like hell from ground level.
Perhaps keeping interest rates high and tight will place temporary restrictions on overall growth but we need to get a handle on debt and we need to rethink our strategy for maintaining our national economic health. Additionally, when interest rates climb a bit, savings rates climb also as do the activities of foreign investors. Besides, who's calling the current interest rates unacceptable? When I bought my first home, interest rates for a 30-year, fixed-rate home mortgage were running at about 12 percent.
Today's home buyers are spoiled. Yeah, they're spoiled rotten and a decade of cheap mortgages have caused an artificial and dangerous bloat in the true value of real estate. Now it's all going to reset. If you think municipalities are having budgetary problems now, just you wait while these real estate values continue to recede. Real estate tax assessors nation wide are already beginning to cringe in fear. Now ain't that just too bad.
Don't buy what you can't afford. Don't risk what you can't stand to lose and don't spend what you don't have. It's that plain. Perhaps I over simplify or perhaps I'm just too darn idealistic but the fact is that the more it costs you to go into debt, the less likely you are to do it. Learn to conform your desires to more closely fit the shape of your wallet and you'll sleep better at night. I promise you that.
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