Michael Mandel's low-rate world collides with my end of easy money

Business Week's Michael Mandel wrote Wednesday, in response to my article on "The End of Easy Money":

But here's the problem--long rates are falling. The ten-year rate is now down to only 4.91% on the bloomberg machine outside my office (at roughly noon). And the latest mortgage rate for 15-year mortgages is 6.38%...that's compared to 6.39% for July 2006.

Now, there's no doubt that subprime woes are going to tank the subprime mortgage market. And some of the riskier CDOs are going to have real problems.

But the question is whether the difficulties in these particular markets will spill over to other parts of the credit market. A look back at the last credit crisis--the dot.com bust--suggests maybe not.

Michael has some skin in this game: He co-authored a cover story back in February called "It's a Low, Low, Low, Low-Rate World: Why Money May Stay Cheap Longer Than You Think." And I don't entirely disagree with his premise, which is that the growing sophistication of credit markets, coupled with foreign investors' and central banks' appetite for U.S. Treasuries, will keep long-term rates on low-risk securities down for years.

But my article, being as how it was in Time and not Business Week, was almost entirely about the rates being paid by U.S. consumers. And guess what: short-term rates (ARMs, home equity loans, credit cards) are higher than or as high as they've been in years, and fixed-rate mortgages are almost as expensive as they were last summer, when the domestic economy and in particular the housing market were a lot stronger (yeah, I know the GDP number released today was pretty good, but everybody's saying it won't hold up this quarter). And if you've got a low credit rating, it's a whole new world from a year ago, when lenders were competing to throw money at you. I'm not predicting some kind of future credit Armageddon, just stating that, from the perspective of American consumers, the easy money days are over.