Patricia W. Chadwick has had more than 35 years of investment experience. She is the founder and president of Ravengate Partners LLC, a consulting firm that provides advice on financial markets and global economics.
The new buzzwords – Quantitative Easing – have been added to the alphabet soup of remedies for our still ailing economy. The quick fix “QE” recipe consists of the Fed buying bonds and flooding the economy with the proceeds in the hope that more money will inspire the recipients to spend the dough and thus get the economy off its rump.
The glut of housing is keeping prices exceptionally low despite the extremely favorable interest rates that mortgage seekers can obtain. But fair warning - interest rates will not stay at this level forever. In fact, I believe it would actually benefit the economy to have rates rise somewhat.
That is the question for many potential homebuyers. (Apologies to William Shakespeare) But it is complicated by two other questions that must be answered by two other related parties – (1) the seller: To sell (at a distressed price) or not to sell (and wait till the market improves) and (2) the bank: To finance or not to finance.
The Wall Street Journal’s weekend editorial “It Isn’t Working” lamented that “three years of spending and monetary stimulus haven’t helped jobs”. While making a number of valid points...it failed to point out that the Federal Government has provided a significant amount of valuable and essential stimulus to the economy with an important part of the stimulus program – namely, in refurbishing the highways.
Now is not the time to cut off unemployment benefits in this country. Admittedly, extending the benefits will add to the Federal budget deficit, but not doing so will add to mortgage delinquencies and homelessness and will only serve to impede the still fragile recovery currently under way.
The real problem that faces the public sector – Federal, State and local – is its lack of accountability, its lack of competitiveness and its bloated cost structure. That is where the knife needs to be used.