Interest rates sink to 9 week lows
So far, all the talk of the Fed starting to dump their $4.5 trillion dollars of United States debt into the open market is all smoke and mirrors. For the second straight week, the interest rate on a conforming 30 year fixed loan has dropped and this week it was a substantial one, down 11 basis points to 3.73%.
If you are watching the total national debt of the United States of America, you have to be shaking your head. If you aren’t paying attention, you should be. It was just about a week ago that Donald Trump nominated Jerome Powell as the next chair of the Federal Reserve. Not a job I would want. You see the odds are very, very, very high that the national debt issue is going to blow up during his term. And that explosion is going to painful for almost all Americans.
Paradise Sharks has said for years that interest rates cannot move much higher. If they did, we couldn’t pay our bills. You see we can’t pay our bills now and after a doubling of the debt under the Obama administration it is now starting to spiral even further out of control, if that is possible. Trump’s recent tax cut plan has a little problem. No make that a big problem. It is going to add an additional $1.5 trillion to our national debt. We are within days of hitting $20.5 trillion.
You see, mortgage rates are closely tied, or at least historically they are, to the 10 year Treasury. Interest rates on a 10 year Treasury note fell to 1.46% in July of 2016. Trump’s election had investors feeling his administration would help create jobs and boost the economy and rates climbed all the way up to 2.6%. Last year the 10 year Treasury averaged 1.84% and our government paid out $497 billion in interest. In reality they just created more debt.
Rates on the 10 year Treasury have come down from the lofty post elections highs and today sit at 2.32%. If rates were to jump, say a point and a half, to 3.6% which is where they were in 2008 the annual amount that would need to be paid to service our debt would be over $1 trillion a year. We don’t have the money and investors aren’t lining up these days to buy our debt. That is why the Fed has had to purchase $4.5 trillion dollars of our debt.
The stock market is booming because other worldwide economies are in worse condition and international investors are flocking to the “safety” of the United States. That “safety” one day isn’t going to be safe. Not sure how safe it is right now but the game of manipulation continues and not sure those running the game really understand where we are going. Neither do I. But I do know one thing. Interest rates cannot go much higher or the game will be over.
There are other games I would rather be playing……..