U.S. Money: What’s Next?
The one sure thing about the economy is that there is no sure thing, especially in the wake of the most destructive forces to strike the U.S. economy since the 1930’s. Unemployment is still elevated, although signs of strength are returning to the labor market. The housing market has rebounded, and other positive news continues to come out, including a recovery in the manufacturing sector.
Japan’s economy has been in a near-permanent state of low growth since the 1990’s, when its own version of asset bubbles imploded. Interest rates were held down for an extended period, a strategy that many economists believe ultimately made their fundamental problems worse.
Clearly, the Fed does not want to emulate the questionable policy decisions Japan made during that period, certainly no more than some believe it already has. With easing likely to end next year, expect the yield curve to steepen as long-term rates are allowed to rise.
The good news: a positively-sloped yield curve typically portends a strong economy. The bad news? If you haven’t refinanced by now, you’d better hurry.
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