“Easy” question about interest rates

[Eugene]

Like others said – credit crunch means that banks are less eager to lend, their demand for your money is lower. Lower federal funds rate means lower “prime rate”, and many kinds of loans are tied to the prime rate (credit cards, auto loans, HELOCs). Banks get poorer returns on those loans they do make, so they have to lower yields on savings accounts and CDs.

On the other hand, savings rate is up. People are not spending their money as freely, even large chunks of stimulus checks end up in savings accounts.

[CA renter]

Like others said – credit crunch means that banks are less eager to lend, their demand for your money is lower.
————–

Agree that they are less willing to lend right now, but they are seriously under-capitalized and there is substantial demand for money in the financial markets.

Problem is, the Fed has lowered rates and opened all kinds of “junk exchange windows” so the real price of money (free-market interest rates) cannot be discovered. It is a very poor decision, IMO, but it’s what we’ve got for now. Hopefully, people with money will continue to avoid investing in more risky investments.

The purpose of the Fed’s actions is to force investors into more risky debt instruments, like mortgages, so the financial institutions can offload their losses onto other suckers — you’d think they would have learned from our current situation that that is the worst possible move.

Everyone is trying to paper-over the losses and true value of debt on the financial institutions’ balance sheets. At some point, they will have to take the write-downs, but that’s not happening yet, and the scum at the Fed and Treasury are just postponing the inevitable and encouraging all kinds of speculative gambling in the process.

[CA renter]

Like others said – credit crunch means that banks are less eager to lend, their demand for your money is lower.
————–

Agree that they are less willing to lend right now, but they are seriously under-capitalized and there is substantial demand for money in the financial markets.

Problem is, the Fed has lowered rates and opened all kinds of “junk exchange windows” so the real price of money (free-market interest rates) cannot be discovered. It is a very poor decision, IMO, but it’s what we’ve got for now. Hopefully, people with money will continue to avoid investing in more risky investments.

The purpose of the Fed’s actions is to force investors into more risky debt instruments, like mortgages, so the financial institutions can offload their losses onto other suckers — you’d think they would have learned from our current situation that that is the worst possible move.

Everyone is trying to paper-over the losses and true value of debt on the financial institutions’ balance sheets. At some point, they will have to take the write-downs, but that’s not happening yet, and the scum at the Fed and Treasury are just postponing the inevitable and encouraging all kinds of speculative gambling in the process.

[CA renter]

Like others said – credit crunch means that banks are less eager to lend, their demand for your money is lower.
————–

Agree that they are less willing to lend right now, but they are seriously under-capitalized and there is substantial demand for money in the financial markets.

Problem is, the Fed has lowered rates and opened all kinds of “junk exchange windows” so the real price of money (free-market interest rates) cannot be discovered. It is a very poor decision, IMO, but it’s what we’ve got for now. Hopefully, people with money will continue to avoid investing in more risky investments.

The purpose of the Fed’s actions is to force investors into more risky debt instruments, like mortgages, so the financial institutions can offload their losses onto other suckers — you’d think they would have learned from our current situation that that is the worst possible move.

Everyone is trying to paper-over the losses and true value of debt on the financial institutions’ balance sheets. At some point, they will have to take the write-downs, but that’s not happening yet, and the scum at the Fed and Treasury are just postponing the inevitable and encouraging all kinds of speculative gambling in the process.

[CA renter]

Like others said – credit crunch means that banks are less eager to lend, their demand for your money is lower.
————–

Agree that they are less willing to lend right now, but they are seriously under-capitalized and there is substantial demand for money in the financial markets.

Problem is, the Fed has lowered rates and opened all kinds of “junk exchange windows” so the real price of money (free-market interest rates) cannot be discovered. It is a very poor decision, IMO, but it’s what we’ve got for now. Hopefully, people with money will continue to avoid investing in more risky investments.

The purpose of the Fed’s actions is to force investors into more risky debt instruments, like mortgages, so the financial institutions can offload their losses onto other suckers — you’d think they would have learned from our current situation that that is the worst possible move.

Everyone is trying to paper-over the losses and true value of debt on the financial institutions’ balance sheets. At some point, they will have to take the write-downs, but that’s not happening yet, and the scum at the Fed and Treasury are just postponing the inevitable and encouraging all kinds of speculative gambling in the process.

[CA renter]

Like others said – credit crunch means that banks are less eager to lend, their demand for your money is lower.
————–

Agree that they are less willing to lend right now, but they are seriously under-capitalized and there is substantial demand for money in the financial markets.

Problem is, the Fed has lowered rates and opened all kinds of “junk exchange windows” so the real price of money (free-market interest rates) cannot be discovered. It is a very poor decision, IMO, but it’s what we’ve got for now. Hopefully, people with money will continue to avoid investing in more risky investments.

The purpose of the Fed’s actions is to force investors into more risky debt instruments, like mortgages, so the financial institutions can offload their losses onto other suckers — you’d think they would have learned from our current situation that that is the worst possible move.

Everyone is trying to paper-over the losses and true value of debt on the financial institutions’ balance sheets. At some point, they will have to take the write-downs, but that’s not happening yet, and the scum at the Fed and Treasury are just postponing the inevitable and encouraging all kinds of speculative gambling in the process.

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