Daan de Wit: So it's really much ado about nothing despite the intensive coverage during those few days.
Willem Middelkoop: The concern, anxiety and uncertainty gets magnified because the American economy is now seriously beginning to weaken. After the American technology bubble burst, we saw how American bankers, the Federal Reserve, dramatically lowered interest rates from 6% to 1% in 2002, 2003, 2004. As a result, borrowing was very cheap. And because of this, auto sales remained steady because auto financing could be offered with 0% interest. A huge wave of speculation arose because of these extremely low rates - you could practically borrow money for free in order to speculate with it. And in order to stem the flow of all these excesses and fight inflation, interest rates had to be raised. That's what we've seen during the last year and a half; rates have risen from 1% up towards 5%, and that has meant that General Motors and Ford can no longer offer such cheap financing. And so now GM and Ford have seen a slump in sales of around 30%, which has led to big problems for the auto industry. What we've also been seeing is that, due to the extremely low interest rates from a few years ago, a new bubble has developed - a new wave of speculation in real estate. One out of every three homes sold was purchased as an investment property, and because interest rates have gone up, housing prices have stopped rising. Now that whole wave of speculation that we've seen expanding over the course of the past few years is beginning to reverse itself. So now what we're seeing is that a lot of speculative investors want to convert their real estate into cash, which has led to a glut of real estate offerings in America, which in turn has led to falling prices. And now big problems are beginning to appear in the American mortgage market.

Daan de Wit: What does this development mean for renters and home owners in The Netherlands?
Willem Middelkoop: In and of itself, not really all that much. In America the speculation has been massive, and we actually saw that here during the 90's. It's just that back then the excesses were not as great here as they are in America now. We saw some of the air leak out of prices between 2000 and 2003. In Amsterdam for example, prices fell 15, 20 percent. But because of a strong demand for housing, continued low interest rates, and a growing economy, those housing prices have actually begun to rise again. What is worrisome though, is that a whole slew of pension funds have invested in American real estate. Dutch fund ABP for instance has more than 8 billion euros invested in products. And in order to secure those investment products, ABP has actually acquired American real estate as a hedge. If something really does go wrong with the American housing market, it could also cause problems for pension funds that have invested a lot in those types of products.

Daan de Wit: And very specifically, if you're getting ready to buy a house now... Is it advisable, or not? Rent? What's the smartest thing to do?
Willem Middelkoop: Well, that's really tough to say. You can see interest rates going up somewhat now. It's not only in America that mortgage requirements are being tightened - it's too late to lock the stable door after the horse has bolted, as they say - so now the requirements for getting a mortgage are definitely being tightened up. We're actually seeing the same thing happening in Europe. The requirements are being tightened here as well. It's getting harder to obtain mortgage loans that exceed the forclosure value of the home. That's actually keeping housing prices from being able to climb much higher. But on the other hand there is so much money being created in the world that we're still finding ourselves in a sort of inflationary spiral. If you have inflation, then those housing prices are going to keep going up. That's purely because housing prices rise right along with inflation. The risk of a really sharp plunge in housing prices isn't very great in The Netherlands, unless the economy were to weaken considerably. But as to whether you're guaranteed to make a profit if you buy a house - that's not to be expected either.

Daan de Wit: My interviews with you are being published in book form by Nieuw Amsterdam. What else can you tell us about that?
Willem Middelkoop: Right now I'm busy writing the first book, entitled If the dollar falls. It is a collection of the conversations that we have held during the past year, as well as the columns that I've written in the interim. I'm actually trying to explain the major developments in the economy in a very easy and accessible fashion by way of a hundred answers to a hundred questions. It has to provide insight in a very accessible way into everything that's going on at this moment.