[quote=AN][quote=CA renter]It’s very likely that low rates caused loose lending. When investors are not able to earn forecasted returns over many years, they have to reach for yield by moving out on the risk curve (think: pension funds). They were able to earn higher returns with the riskier debt…at least for a little while.[/quote]
So you’re saying loose lending standard would have never happened if rates didn’t drop?[/quote]
Yes, that’s exactly what I’m saying to a large extent. It cannot be emphasized enough: artificially low rates cause loose lending and much more risk-taking. It’s exactly why they are forcing rates down so low right now. They want us OUT of cash and INTO the riskiest investments out there. That is the only way they can keep asset prices so inflated (unless they literally print up money and hand it out, which they are doing as well) — so we don’t have another financial “crisis.”
‘Cause we all know that low asset prices spell THEN END OF THE WORLD!!!!! (/sarcasm)
