Something strange happened on the way to higher interest rates: they declined. We're talking about rates on long-term mortgages and bonds. These rates truly affect the economy, because they influence housing and business investment. Most economists expected them to rise. But no. Last June rates on 30-year fixed mortgages averaged 6.29 percent; now they're about 5.7 percent. Federal Reserve chairman Alan Greenspan recently called the declines a "conundrum." Equally puzzling is whether the declines guarantee a healthy economy— or suggest a speculative "credit bubble."
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