As I suggested earlier, it seems inevitable that interest rates go up because of the increased need for credit by the federal government (and state governments too). Competition for credit between government, business, and consumers should create more demand at a time when foreigners would hesitate to put their funds here simply because of fear of the dollar continuing to lose value. So you could have rising interest rates even without inflation.
Greenspan sees no problem with rising mortgage debt. Of course, he's looking at markets he's familiar with, particularly in the Washington, DC area. If you think that the average home appreciates in value over time, of course an increase in mortgage debt will not be of much concern. But there are many places in the country, for example, here in upstate New York, where the average sale price of homes has barely moved in ten years, or where the price is actually lower now than ten years ago. If a property is losing value, the owner will do the rational thing--stop paying the mortgage because to continue paying would simply result in ownership of a wasting asset.
I don't think Greenspan anticipates foreclosures because the only real estate he sees from the comfort of Washington is going up, year after year.
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