The question of the day is 'Will interests rate cut by the Fed save...

The question of the day is 'Will interests rate cut by the Fed save housing and the economy?'Jim Cramer Says 'Yes'Jim Cramer's opinion can be seen in Financial TV host flips out over the state of the economy.(click on the above link to see Cramer in action)But the answer is 'No'.So we've seen what Cramer has to say, let's take a serious look at whether Fed rate cuts will save the economy and why I believe the answer must be 'no'.The first reason is that long term rates (the 10 year treasury), simply may not decline when the Fed starts cutting. Does anyone remember 'Greenspan's Conundrum'? If not, Greenspan was perplexed as to why long term rates did not rise much as a series of 17 consecutive rate hikes by the Fed were made. On that basis it is therefore entirely possible that when the Fed starts cutting (and they will), that long term treasury rates may not follow. Clever readers will now be asking 'Wait a second Mish, you said may and now you are presuming will. What gives?'That brings up reason number two. Everyone knows Mortgage rates are directly tied to the 10 year treasury note. Or are they? I have been stating for well over a year that mortgage rates would disconnect from the 10 year treasury note. Some have laughed at me for that viewpoint. But my reason was simple: increasing default risk would eventually force it. While the 'Reverse Conundrum Hypothesis' is indeed just that (it may or may not happen and now I think that it won't but it could), the 10 yr vs. mortgage rate disconnect is no longer a theory. Eventually has arrived. The disconnect is now well underway. It started in June and has blown wide open in the last two weeks. Yes, I have proof. Consider the following chart of treasury yields for the past 12 months.$TNX - Treasury Yields(click on any chart for a crisper view)The above chart shows all the major rallies and declines in the 10 yr treasury over the past year in basis points. Bankrate. com 30 year fixed mortgage rates(basis points are approximate given chart scales)Major Moves: Treasuries vs. 30 yr Fixed Mortgages32 basis points vs. 20 basis points44 basis points vs. 37 basis points43 basis points vs. 22 basis points84 basis points vs. 74 basis points60 basis points vs. 13 basis pointsLook at those last two data points closely. An 84 basis point rally in the 10 year led to a 74 basis point hike in mortgage rates. On the subsequent decline of 60 basis points only 13 were picked up in mortgage rates. But it's not even that good. Not even close. Bankrate. com 30 year fixed mortgage rate JumbosJumbo rates went UP even with that substantial rally in treasuries. Bankrate. com 5/1 ARMs5/1 Arms are similar to 30 year fixed but.... for all the additional risk, the consumer is saving a mere 25 basis points. All of the above charts are for Prime Loans, with good credit scores, and a down payment. Inquiring minds are no doubt wondering what happens in other conditions. Major Disconnect in SubprimeLate last Friday I gave a call to Dave Donhoff at No Bull Mortgage and was wondering about subprime and Alt-A, and how they were affected by these treasury gyrations. Before I go further, let me say that Dave is one of the good guys. He has not had a single returned loan or foreclosure on one of his customers in the last 6 years. Although Dave has not been tracking exactly what I wanted he did offer this: