Monday, February 9, 2009

Will low interest rates boost the sales of houses?

. By Sidney Perez

Ben Bernanke, president of the Federal Reserve, decided in December to decrease the US interest rate to 0,25%. But will it really allow the housing market and the economy in general to recover?

I do not really think so.

For instance, the sales of houses in New York have been a little decreasing since December.

One explanation is easy : even if interest rates are very low, banks cannot really lend money because they suffer of a big lack of liquidity.

Furthermore, they cannot lend money to people without a very good financial situation. So, only "the rich" can get loans.

Thus, decreasing interest rates is not really efficient if the population does not have access to credit. Indeed, a lot of employees are losing their job, and are automatically ineligible for a loan.

Maybe decreasing interest rates can help but the most important is to find a solution to job losses.
Should the federal government nationalize banks in order to be sure that they will be well managed?

Is Obama's new politics able to cut job losses and help the "new poors"?

All are questions that are crucial to face the crisis.

But, is it really posible to say that the economy will really be able to recover?

I do not know the answer, but I am afraid that too much speculation in the past just created an unreal market which real value is now known and very low comparing to the past.

So, it will be hard that the economy will recover totally to the level it had before the crisis.

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