By Rick Ackerman
Europe’s all-too-predictable relapse into recession is gathering force, threatening not only the pipe dream of economic and political unity, but eroding grandiose illusions that have helped prop up the world’s financial house of cards. The unwillingness of France in particular to play by the EU’s — i.e., Germany’s — rules appears to have doomed the EU dream. The idea of a borderless Europe bound by a common currency and a shared desire to forever banish war from the Continent was a lofty one, but it was mired from the start in deeply rooted political animosities, grass-roots skepticism and bureaucratic overreach. Now these problems, along with a great many others, have turned the EU project into a Tower of Babel. A million pages of meticulously codified EU rules might as well have been written in cuneiform, so inscrutable and arcane have they become.
A minuscule move up in mortgage rates caused a significant downdraft in mortgage applications.
And with cash buyers increasingly out of the picture, mortgage dependent buyers are where it’s at for real estate. The problem is the latter group is still on very shaky economic ground.
All the meddling in the housing market by the government. All the below market rates of interest from the Fed. All the “stimulus.” And this is where we are, spinning our wheels.
It’s been tough to save money since the Crash. Right now many of us are receiving a negative real interest rate on our savings. (If we have savings.) That is, the interest we get on our money is not enough to keep up with inflation. From the moment we buy a CD or deposit money into an interest bearing account we are actually losing money. (We are losing even more money though if we keep it in our mattresses – by a very small amount.)
Look for this to spread.
For now the negative interest rate of -0.1% will only apply to bank reserves held at the central bank. The stated objective is to persuade the banks to reduce their reserves by lending more.
The Federal Reserve today announced that it is bringing in a former state insurance commissioner, Thomas R. Sullivan, to strengthen and head its insurance regulatory office. This is a good idea. Most insurance regulation is at the state level, but the Fed has a huge impact on insurance, especially through its interest rate setting.