The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Elroy Jetson who wrote (17993)	3/2/2004 11:54:37 AM
From: Wyätt Gwyön	Read Replies (2) of 306849

Compare short-term and long-term rates for 1931 (1% vs. 5.5%) or 1935 (0.25% vs. 3.85%). These spreads were quite extreme yes, and notice that you had to go back to the 1930s to find these types of spreads. they don't exist in the postwar era except for now, which is consistent with the argument that we are in a deflationary environment. also note that what happened in the 30s was long rates came down, and stayed down, well into the 1950s. The rate history of the 1930's wasn't complicated by Japan and China purchasing massive quantities of dollars and using those dollars to purchase debt issues of various if you think about it, Japan would rather that we have higher rates--it works against them for rates to be so low here. why? because it takes away the carry trade. for much of the 1990s, high USD short rates allowed hedge funds to borrow JPY and buy T-bills, thus doing the BOJ's work for them in supporting a stronger dollar. with US rates so low here--and with leveraged speculators now massively shorting the USD to arbitrage short rates in other countries--BOJ is forced to do the dollar-buying itself.

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