The average U.S. rate on a 30-year fixed mortgage fell to 4.98% this week as the Federal Reserve announced it would double purchases of mortgage debt as part of its effort to lower rates and lure home buyers to the market. This is part of the Fed’s $1.15 trillion plan to buy up bonds.
Conversely, the dollar took a beating yesterday against key European counterparts; euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona. The dollar dropped 2.7 percent as investors feared the repercussions of this action. It was the steepest one-day fall in nine years.
My Inflation 101 Manual says if there’s too much of one thing, it’s worth less. Simply printing a trillion dollars up and dumping it into the economy band aids a problem while creating a far greater one. Now the dollar isn’t worth as much. Had things just been left alone, we still would have had fantastic mortgage rates and a US dollar that had previously strengthened during the economic downturn as demand for safe and reliable U.S. Treasury bonds shot up with the stock market tanking.
