Quote

It would be helpful if someone would lay out exactly the economic mechanism that gets us from yet lower interest rates to actual economic activity.

The big question is: When will the term structure of interest rates change? That's the question to be worried about.

Obviously, there has to be a profound change in direction. Otherwise, interest on the national debt will start eating up virtually every penny that we have.

Right now we think that rates will stay low, that you'll be able to get a mortgage below seven percent and that's kicked off a refinance boom that's going to put more money in the pockets of consumers.

We think if the economy remains weak that we could see mortgage rates trail down and we think that we could see rates below seven percent into early next year.

And so the danger for the housing industry is if we see interest rates rise.

To pump up consumer or government demand would force interest rates up and asset prices down, possibly by enough to destroy more jobs than are created.

It's appropriate for the Fed to gradually and cautiously increase our overnight interest rate over time.

Low interest rates are a big opportunity for investment. But the issue is that this money should go to the real economy, not the financial economy.

Stronger productivity growth would tend to raise the average level of interest rates and, therefore, would provide the Federal Reserve with greater scope to ease monetary policy in the event of a recession.