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The European dept crisis happened as a result of the euro being introduced in 2002 as the single cur

Bonds the cost of borrowing rises because of general

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bonds, the cost of borrowing rises because of general riskiness and stock prices fall. Therefore our ability to export is hurt if the rest of the world is not doing well. America does a great deal of trading with Europe therefore the strains on both economies have not been good for business.
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On balance, it is a negative for the economy when Europe is under duress. Mortgage rates are historically quite low--in part because of the Fed's policy of keeping interest rates low, but also because there is a flight to quality bid, a flight to safety bid now. We see it every time there is disruption globally--people want to buy Treasuries, and that factor has been a very important development that has been keeping mortgage rates low. Most mortgages now are Fannie Mae and Freddie Mac, which are under a conservatorship arrangement with the U.S. government. They're about as close as full faith and credit as you can get to government securities, so they benefit from that flight to quality. Importantly, before the summer of 2008, before Fannie and Freddie had that designation, we did see a lot of disruption in the mortgage market. But I think the combination of Treasury policy and Fed action has really made mortgages trade pretty closely to Treasuries--so they tend to benefit from that.
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