The Obama Administration appears to be tossing in the towel on consumers in this recovery. I missed it yesterday but one of our subscribers brought it to my attention; in the WSJ yesterday Sec of Treasury Geithner made this comment; "He said the U.S. can no longer rely on consumer spending, which has long powered the economy, to be the growth engine that leads the recovery this time around and said Washington needed to plant the seeds for business investment and exports." Well, in a perverse sense he has a point, the admission that consumers in the US are not going to bring the economy out of its slump and exports have to drive it forward indicates this administration has tossed in the towel. Exports, what exports? The US gave up its export base 20 years ago, we cannot compete in the export markets to the levels that will change how the US economy will grow itself out of this slump. Consumers in the US have accounted for 65% to 70% of GDP growth, although consumer spending will likely increase from what we have now, to think that we can rely on exports is wishful thinking in the short and intermediate term. To focus on exports is long overdue, however to be competitive US wages will have to decline in order to compete with low wage major countries like China, Japan, Indonesia, India and others; that won't happen anytime soon. This economic recovery cannot be speeded up, that is a hard pill to swallow but we all better get used to it. Planting the seeds is the first step, but it takes years for a seed to grow into a tree.
The interest rate markets rebounded the past two days to technical levels of resistance. This morning so far markets are testing resistance levels in mortgages and treasuries. If the 10 yr note can push below 2.65% (now 2.69%) rates will likely continue to slip lower; however the near term is still slightly negative; 4.00% for the 10 yr note is what many are thinking. If the 10 yr were to climb to 4.00% mortgage rates on 30s will increase 10 basis points in rate from current rates.
| | Yesterday | Today | | 30 Yr FRM | 4.37% | 4.39% | | 15 Yr FRM | 3.78% | 3.80% | | FHA 30 Year Fixed | 4.39% | 4.42% | | Jumbo 30 Year Fixed | 5.55% | 5.58% | | 5/1 Yr ARM | 3.53% | 3.55% | Updated: 9/15/10 5:14 PM | | |
| | Rate | | Change | | 30 Yr FRM | 4.35% | 0.7 | 0.03% | | 15 Yr FRM | 3.83% | 0.6 | 0% | | 1 Yr ARM | 3.46% | 0.7 | -0.04% | | 5/1 Yr ARM | 3.56% | 0.6 | 0.02% | Source: Freddie Mac Updated: 9/9/10 2:00 PM | | |
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