I get that people want to protect their wealth, and that there is much uncertainty for the future, but I can't see the reasoning behind these current low rates. I've always operated with the understanding that long term rates equalled the projected inflation rate plus 2%. Currently, that would put long-term rates at about 4%. Is it the long-term view of the 'smart money' that the future isn't so rosy?
rates are low because economy was slow under socialist anti business Obama. They should rise under pro business Republican Trump. Its as simple as that.
Trump says not thrilled with Fed's Powell for raising rates... Exclusive: Trump says not thrilled with Fed's Powell for raising rates AUGUST 20, 2018 | WASHINGTON (Reuters) - U.S. President Donald Trump said on Monday he was “not thrilled” with Federal Reserve Chairman Jerome Powell for raising interest rates and accused China and Europe of manipulating their respective currencies.
Because the interest rates are set by the government bank and the government has massive debts. So, either the Fed sets low interest rates or the board gets the sack.
Two possibilities. The Federal Reserve Bank is still holding them down low. That would of course be leading to some inflation, since it costs money to lend out money at below market interest rates. (If this is the case, the Fed can't do it forever, because eventually too much inflationary pressure will accumulate) Or profit margins are really low, and there are not a lot of returns. There are people with large reserves of money and wealth, but not really anywhere to put that money to grow their wealth. An excess of investors relative to opportunities drives down yields.
They were set low to stimulate lending and borrowing in the economy. The Credit Crunch was a period when investors were in very short supply. Interest rates were close to zero. Now so much has been borrowed, mortgages, government debt; to put the rates back up will wipe all the borrowers out.
I haven't been here long, but I've seen enough of your posts to know that you're not a dumbass. So, please don't respond as if I'm being a smartass. I just don't know what you're talking about. "Why?" Why what? Why are long term interest rates so low? I guess that I know. I guess that it's because people think that, long term, inflation will remain relatively low. But, why is that? "Think about the loan sharks that love all that legal dough.." Don't get it...
Legal loan sharks are bankers that take low-interest loans and puts them into high-interest loans like cash into check schemes at around 350% interest..
What about the ones that take low interest loans, loan them out to high risk borrowers and crash the banking system? If you lend to subprimes the interest rate must be high. Because they don't repay as much as reliable people do. So you have two real choices, lend at high interest rates or don't give these people a loan when they want one.
interest rates are low at this point primarily because wages are low. If Trump could kick the illegals out problem would have been solved years ago.
And low interest rates artificially prop up property and investment asset prices. Quick simple math example to illustrate this. In normal times an investment costs $100 and has a $6 annual return. All of a sudden interest rates drop. Well now if someone can borrow $100 and pay only $4 interest on the loan, it makes sense for them to borrow money and buy that investment asset to make a profit. So what is ultimately going to happen is the cost of that investment asset will go up to $150, the point at which people will no longer have an incentive to borrow that money at the low interest rate to try to make a profit buying those investment assets.
