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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (34841)	6/27/2005 11:42:13 AM
From: John Vosilla	Respond to of 110194

Once the housing bubble busts why should interest rates keep rising slowly but relentlessly? Isn't the regional housing bubble dwarfed by our mounting twin deficits and continued debasing of our currency? Think Argentina once US loses its reserve currency status.

To: mishedlo who wrote (34841)	6/27/2005 2:10:35 PM
From: GST	Read Replies (2) \| Respond to of 110194

<Once the housing bubble busts why should interest rates keep rising slowly but relentlessly?> Are US interest rates primarily driven by the demand for housing? I don't think so. They are set on the international market. The supply of savings on which we now rely requires importing capital. The cost of this supply is likely to rise if the US economy and dollar are perceived to be vulnerable to a slowdown. On the demand side, the foreign borrowing requirements of the US are driven by the current account deficit and government debt -- both are needed to get a sense of the cost of renting money from foreign sources. US interest rates are not set in the US -- they are set by the foreigners who decide how much it will cost us to borrow their money.