Today’s economic news is very gloomy and rightfully so. For the first time in our history the United States triple-A credit rating has been reduced to double A plus. Even worse is the fact credit rating agencies are talking about downgrading this rating even further. Of course, this makes the economic outlook in the United States even worse than it has been. So, amongst all of this bad news, is there anything worth smiling about? Maybe in fact, there is.
Currently, most people are pulling their money out of stocks. While the price of gold and silver has skyrocketed over the last few years, a lot of people are either hesitant to buy these precious metals at their already historically high prices or they feel their portfolio includes all the precious metals it needs. Also, the business climate is very uncertain and so no one, it seems, is investing there.
This is true because the health care bill which will become law in the future is sure to contain many anti-business regulations even though many of them are yet not known. Most investors are afraid to commit funds to a business that, in the end, could cause them to go bankrupt. So, with no place left for people to sink their money, other than inside their mattresses, just where is it going?
By default, a lot of money is moving toward the bond market. The bond market controls interest rates. The higher the price of bonds goes, the lower interest rates become. Conversely, the lower bond prices go, the higher interest rates become. This means, with money being available because everyone is afraid to invest it elsewhere, the price of bonds are being bid upward. The end result is interest rates are headed still lower.
Because of this trend, though it seems absolutely incredible, it is not out of the question we will see mortgage rates as low as 2.75% in the near future. The monthly mortgage payment for a 30 year mortgage of $200,000 at 2.75% is $816.48. For anyone who is able to refinance his or her home, this presents a great opportunity. Provided there is any equity in the house at all, one could cash out that equity and probably end up paying a smaller mortgage payment then he or she currently is.
While this is a small consolation in an economic environment marked by the highest sustained unemployment rate since the great depression, it is at least something other than doom and gloom we can look to. Throw in the fact oil prices will keep falling as the economy slows and it may give us something on which to build a positive attitude.
Before we get carried away however, it is very hard to keep a positive outlook when we have a president who blames his hardest working citizens for the government’s woes instead of his inability to stop overspending. Still, any modicum of hope is welcome when, for the time being, we can only dream of days when people can once again put their ideas, aspirations and money to work.
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