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> On Wed, Nov 5, 2008 at 7:06 AM, Morris wrote:
> COLLAPSE OF ST RATES HAS DONE SQUAT FOR LT RATES- so consumer
> has gotten no benefit in trying to procure Long Term financing especially
> in housing, where all mtge rates are near the high for the last 52 wks–
> the spread between Fed Funds to Jumbo Mortgages is now 680bps–
> has got to be a record… Great for spreads at banks…not great for
And banks are not allowed to take ‘gap’ risk so it doesn’t do much for them, either.
Short rates are down because of Fed funds cuts by the Fed and the unlimited lending internationally via the swap lines bringing down three month rates.
To bring long term rates down they need to stop issuing long term Treasury securities and buy back the stuff that’s outstanding. Treasury securities function as ‘interest rate support’ for their given maturity.
But even lower long term rates won’t do a lot when there is a shortage of aggregate demand because the budget deficit is too small.
And an unfriendly foreign monopolist setting crude prices can only be addressed by immediately cutting our consumption.
MOSLER’S LAW: There is no financial crisis so deep that a sufficiently large increase in public spending cannot deal with it.
(as stated by Prof. James Galbraith)