The trade news for March was better, but still shows a close to $600 billion dollar annual trade deficit. Additionally, the federal government's deficit, now running about $400 billion per year shows no sign of diminishing. For now, foreign creditors appear more than willing to absorb U.S. public debt in virtually unlimited amounts, at relatively low interest rates. This has led to the phenomenon of the inverted yield curve wherein short term rates are actually higher than long term rates. For real estate this means that"?mortgage remaining low enough to sustain market activity.

As an economy, we cannot afford these deficits over an expanded period of time. Even if rates don't rise (which they will), the money spent to pay the interest on the growing debt restricts our ability to invest in education and infrastructure, both needed to keep pace with groing economies in a flattening world. Additionally, the need to keep debt service low means the athe Fed cannot raise rates when the economy gets overheated. Alan Greenspan realized this and thus began a gradual process by the Fed of raising short term rates two years ago, as a preemptive measure.

And, with the Medicare and Social Security bills for the baby boom coming do, there appears to be no end to the federal budget part of the debt run-up. The bottom line here is that we must eventually pay the piper. Given our current behavior, that payment will have to be made by our children and grandchildren. Our legacy to them will be a less bountiful economy.

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