Quote:
Originally posted by Spanky
These long term mortgage rates are set by people (not by Greenspan). The rates reflect what the mortgage traders (the market) think the future federal deficits will be. For some reason they are optimistic about future US budgets. I am no longer in these circles so I have no idea why they think that. All I can assume is that they know something we don't.
I should also point out that during the Reagan era that the markets had no confidence in the Dem congress balancing the budget or in Reagan being able to get them to pass anything close to balanced budgets. I could be wrong, but I am pretty sure they were really high in the 80s (higher than 8).
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That all may be well and good, but it doesn't change the fact that the previously assumption (big deficits = higher interest rates) has not held up in the 21st Century.
