Steve Forbes Got it Almost Exactly Right

Steve Forbes recently spoke at a meeting I attended, emphasizing the need for lower interest rates. He argued that a strong dollar is essential, since a weak dollar ultimately drives rates higher.

While emphasizing the importance of lower interest rates, Forbes noted correctly that housing affordability depends on them. He also argued that easing permitting and regulatory barriers and removing tariffs on lumber and other building materials are essential to lowering housing costs.

What he did not address, however, is the core constraint: as long as the federal government is running multi trillion-dollar deficits, long-term and mortgage rates are unlikely to fall meaningfully.

Massive deficits require massive bond issuance, and an ever-growing supply of bonds inevitably forces investors to demand higher interest rates. Unless Congress makes a concerted effort to cut the deficit, efforts to lower interest rates and improve housing affordability will remain largely futile.