Several unusual forces are pushing and tugging at markets, making it hard to isolate actual changes in trend.

There were no good clues in the economic data, neither signs of stall nor acceleration. New claims for unemployment insurance in April have been a hair higher than in March, near 450,000 weekly. New mortgage applications are running 31 percent above February, confirming a remarkable spike in home sales, but we won’t know until mid-May how much is due to the expiring tax credit (bet on "a lot").

First-quarter U.S. gross domestic product pulled up 3.2 percent in today’s release, the third straight quarterly gain, but the stock market is down on the news. Consumer spending was a healthy component, which it sure as hell ought to be, given the Treasury hosing $150 billion that it doesn’t have into American pockets each month.

In one of the best measures of inflation, the GDP report had its annualized rate dropping from 1.5 percent in the fourth quarter to 1.1 percent. Low inflation is good; too low is not.

The all-defining 10-year T-note continues to fall in yield, a four-week straight-line decline from 3.99 percent to 3.66 percent this morning. 3.6 percent is the next key level, going all the way back to December. Maybe this drop reflects recovery skepticism among global bond investors, or maybe it’s a temporary flight from woes in Europe.

Mortgages are stuck at 5.125 percent, the spread to the 10-year at 1.45 percent the widest in six months — possibly widening because flights to quality are usually limited to Treasurys, or possibly because the Fed is no longer buying mortgage-backed securities and mortgages are gradually returning to a normal, 1.75 percent spread.

After its meeting this week, the Federal Reserve tilted its description of the economy ever-so-slightly better, but is obviously still worried, maintaining its "exceptionally low … extended period" rate language.

Kansas City Fed President Tom Hoenig dissented again, his third-straight demand since January to toughen language; the Elmer Fudd of inflation-hunters, he’s still blazing away at a "Wascawy Wabbit" now gone altogether.

Americans are properly preoccupied with our own affairs, the more so the closer we get to our front doors. Most of us feel the weight of employment and housing, and flinch at thinking about the fiscal-repair sacrifices ahead. …CONTINUED

Developments in Europe are incomprehensible to most civilians, but comparisons there to here should be reassuring, even confidence-building. Not the negative pleasure of watching somebody in more trouble than you are, but the positive discovery that you’re more capable than you thought.

Europe, roughly the same population and GDP as here, not even 15 years into a currency union, is too fragmented to protect itself in a credit and budget wreck. We fear political polarization, and grapple with "Bubble Zones," but the gulf between a Bostonian and an Arizonan is nothing compared to Lisbon vs. Helsinki.

In the euro zone, 16 separate national governments, tax codes, treasuries, retirement systems, cultures, 14 different languages … the U.S. is a paradise of unity by comparison.

There are similarities in the financial problems here and there, but our ability to resolve them is without parallel. California could default on its debt without threatening the Union or the dollar. We wrestle with retirement and health costs, but 23 percent of people in the euro zone are older than 60, and only 18 percent here, the gap growing every day.

Our youth has been replenished by immigration, legal and not — people who have seen the limits to opportunity elsewhere.

Our flexibility has no counterpart anywhere. As painful as it is to go through, no other nation would allow a housing bubble to deflate with such violence. We are making more progress than we know. We have retarded the rates of foreclosure and loan write-off, but nothing like the zombie-banks in Japan and Europe.

Nobody knows — can know — where we are in a cycle that we’ve never tried before. But we’re better than we were, and have the means to adapt.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at


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