Re-fi hits hi-fi

Today CNN is reporting that a refinancing boom has swept the country. In my household we are considering approaching our mortgager to refinance our house. Are you doing the same in your household?

The reason that this is relevant is that low interest rates are inducing exactly what they are supposed to induce: economic activity and liquidity flow. As you all know, the American economic system seized up into a catatonic state starting around late-August, early September as liquidity slowed to an absolute trickle. The Federal Reserve dutifully cut interest rates to induce spending to no avail. The financial markets roiled and sank. Chaos, panic and disorder ensued and people started worrying about their jobs as layoff notices rumbled throughout the country. Etc. Etc. However, people now seem to be more comfortable and are starting to think about their futures again, rather than the next economic second. For awhile there the obsession was with what is going to happen today? What shoe is going to drop? Etc. Now the emphasis is shifting to where it needs to be in order for the economy to recover and for the recession to end: the future.

Assuming that there is a record wave of refinancing, that will put lots of extra money into consumers’ pockets that they can spend, save or invest. In all three situations an economic benefit will accrue to the economy.

Things have changed and it’s my opinion that the economy has most likely bottomed out as indicated by the wave of re-fis.

With deep respect for all of you!

Jason