Borrowed money isn’t a permanent answer

Rep. Dennis Richardson

Rep. Dennis Richardson

Oregon’s March 2013 Quarterly Revenue Forecast was released Friday.  Current state revenue is up $161 million over last quarter.

Bright spots exist in Oregon’s housing and banking sectors, and automobile sales are doing well.  So, Oregon’s economy must be improving. Right? Not necessarily. The uptick in in these sectors is related to our current artificially low interest rates.  For instance, today 30-year fixed mortgages can be found at approximately 3.45 percene. For many people, now is a great time to buy, build or refinance a home, if you can qualify. Such low interest rates mean a buyer can qualify for a more expensive home because the monthly payments are calculated at such low rates compared to a more customary rate of say, 6 percent.  Such artificially low interest rates create a “credit bubble,” and, when the current credit/interest rate bubble pops, rates will climb and growth in rate-dependent sectors will again diminish.

The take away is this.  The federal government continues its expensive program of artificially manipulating the national economy with low interest rates, increasing its subsidies to health care programs, paid for with trillions of dollars of borrowed money on which interest payments must eventually be paid. The results of this national policy have been to stimulate our state’s economy, but only temporarily.  In the end, governments are like families and businesses. When they spend too much with borrowed money things looks positive for a while, but then the day ultimately comes when the debts must be paid.

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