We hear on almost a weekly basis that mortgage interest rates in the US are at all-time lows. The annual percentage rates in mortgage advertisements seem near an historic nadir. The Fed has even begun to purchase long-dated mortgage backed securities (MBS) in an effort to push rates even lower and, hopefully, spur more refinancing activity.
One of the themes I developed in my 2010 book, “Inflated: How Money & Debt Built the American Dream,” is the idea that significant amounts of the reported GDP and employment of the post-WWII period and especially since the 1980s has been based upon debt and inflation. The debt-deflation crises today affecting both the US, EU and even China and other “emerging” nations seems to confirm this view.
The departure of US Treasury Secretary Timothy Geithner to Europe to rescue our allies from themselves marks a change in the economic relations among the NATO countries that bears scrutiny. In the past, the loosely-connected federation we call the European Union has managed to muddle along. But now we see overt funding subsidies for the EU via the Fed and the active involvement of Geithner in what ought to be a purely domestic fiscal discussion.