patrick.net

No chance, period.
Interest rates will be continually manipulated and maintained at an extremely low level. At least through the entire Obama Administration. After that, who knows. But there is 0% chance of hyperinflation (or any inflation for that matter), and 0% chance of the fed raising interest rates any time in the next 3 years. In fact as there is no limit to Obama's manipulative debt enslavement forced on all Americans, new and greater incentives will be given to buy stuff, use credit and give up our freedoms, look for more government incentives to buy cars, buy houses, use credit cards, get loans, etc.... 8,000 for first time homebuyers?? Instead of expiring, my guess is something like 10 - 15k "tax incentive" for buying a house, whether you're a first time home buyer or not.

I would look for that "tax incentive" sometime in November. If nothing else, it's a sure thing that the first time home buyer tax credit will be extended indefinitely. Also, depending on the remaining response to cash for clunkers, I would expect that to be extended as well.

I would love to see 7% interest rates, but it's not going to happen by then. Maybe if the Chinese dump all their USD reserves, or something.

Interest rate will be raised when housing will start to recover. and it will be done in a way which makes sure that housing does not go lower due to inerest rate hike.

homeowner_for ever_san jose says

Interest rate will be raised when housing will start to recover. and it will be done in a way which makes sure that housing does not go lower due to inerest rate hike.

What were the interest rates in past two years? Did it stop housing from sliding down? But yes, rapid hike in interest rate will make thing worse and Fed is unlikely is going to do that.

I want the higher interest rate as well, this helps me in two ways:
1) to bring down the house price and
2) Get good return on my saved money(currently getting 0.5%)

But, its not gonna happen, we all know that will be the last thing Ben would do. Sigh.

To bring down housing prices and let you get a good return on your saved money might liberate you from a lifetime of doing what your boss says. That cannot be allowed.

But even if it happened, without health care reform you are always just one illness away from bankruptcy. So they can take everything you ever saved, and your house. Even if you have insurance (50% of policies are rescinded if you make large demands on them).

So you're a slave then too.

Two things must happen to liberate you:

1. an end to the Federal Reserve system
2. universal health coverage (no cost for that if you pay taxes instead of premiums)

In fact, the fed doesn't set the prime rate, but they sort of do do indirectly. They set the fed funds rate. But they also enter into the treasury market buying or selling short term treasuries. Ultimately what they do is very convoluted, and too complicated for most to comprehend.

As for long term rates (such as mortgage rates) that is really determined by the market for long term securities (treasury bonds, mortgage backed securities) and there have been times when the fed lowering rates was percieved to be so infationary that long term rates went up. So historically the fed doesn't really have a way of determining long term interest rates. Except for now, when they actually enter into these long term securities markets because they feel they need to, to prevent disaster.

Patrick I usually agree with most of what you say. E.g. I thought you were right on in "The psychology of American Fascism." But the cynical sort of "it's because 'they' want to keep you a slave," I don't buy. That is the net effect, but I don't see that as the intention.

They aren't going to allow prices to come down as much as the market would take them, because that would be an unparalleled disaster to too many, and a perceived disaster to so many other real estate owners. Really it's just that everyone screwed up, including the bankers in the belief that real estate values would stay up (relatively high). It's a new world where we don't inflate wages, when we (or they) are virtually trying to inflate everything. Assets were inflating like crazy from the credit bubble, but wages weren't because of cheaper labor elsewhere.

Maybe that's an oversimplification. But there are many interests being protected when prices are artificially held up now. Or maybe it's just using artificial means to prevent them from overshooting the downside due to the lack of credit market functioning and so on, and also due to a negative feedback loop of more and more people being so far under water that they walk.

So they prop it up. Funny how people don't get easily bothered by markets over doing it to the upside. That's just another example of the beauty of free markets. But over doing it to the downside ? That's another story. Actually understandable when everyone is so leveraged.

Anyway, I just can't get behind the conspiracy idea that the bankers or whomever needs to keep us enslaved to get more work out of us. When you look at the majority of the 7 billion people in the world, I would say at least 5 billion of them get far less for their work than we do. And I think it's by looking there, to the rest of the world, that one can understand the pressures (toward some kind of equilibrium in the long run) that unfortunately but naturally put some downward pressure on our average standard of living.