Should US mortgage rates rise?

There’s a very interesting article in Barrons (the premier US investment magazine) today. It compares current efforts by Treasury Secretary Paulson in trying to cap US mortgage rates with President Nixon’s ill-fated introduction of a US wage/prices freeze in 1971.

Barrons points out that non-US buyers are already being hit by major write-downs in the value of their US subprime holdings, and adds that ‘now, the interest may be less than promised’.

It is concerned that this weakening of creditors’ rights will discourage global investors from sending their savings to the USA. And it wonders ‘what impact will that have on the current credit crisis? On the dollar? And the status of the US as financial capital of the world?’

US housing conditions are bad enough already. If Barrons is right, the proposed ‘cure’ may end up by making the situation worse, not better. This would not be good news for chemical sales into this important market.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.


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