[mkwin]

$this->bbcode_second_pass_quote('Gideon', '')$this->bbcode_second_pass_quote('', 'W')hy have interest rates been low? - No it's not as one poster said 'because of the evil central bankers', it's due to the deflationary effect of globalization.

[mkwin]

$this->bbcode_second_pass_quote('shortonoil', '[')b]mkwin said:

$this->bbcode_second_pass_quote('', 'W')ith all due respect you, you don't know what you're talking about. Interest rates are set by central banks - not by the financial markets.

[clueless]

$this->bbcode_second_pass_quote('', 'W')ith all due respect you, you don't know what you're talking about. Interest rates are set by central banks - not by the financial markets. Interest rates have been able to be set so low due to the lack of inflation at the traditional point in the business cycle, which is due to globalisation. It's not evil rich guys making a quick buck, it's due to global macro economic events beyond the control of any individual, bank, company, or government.

[mkwin]

$this->bbcode_second_pass_quote('clueless', '')$this->bbcode_second_pass_quote('', 'W')ith all due respect you, you don't know what you're talking about. Interest rates are set by central banks - not by the financial markets. Interest rates have been able to be set so low due to the lack of inflation at the traditional point in the business cycle, which is due to globalisation. It's not evil rich guys making a quick buck, it's due to global macro economic events beyond the control of any individual, bank, company, or government.

[clueless]

$this->bbcode_second_pass_quote('', 'I') buy a standard $100 10 year treasury bond in 2005. The rate is say 4%. Hence, I get 4% in two payments each year and my $100 back in 2015. However, if there is high demand from investors for that specific time period, bond the price of the bond will increase on the bond market. This would mean the price of the bond increases to say £110 dollars and the yield drops to 3.64 % - but only on the market. The new buyer would still get 4% p.a. from the FED but would only get $100 back in 2015 – hence he loses $10 on the purchase and the overall yield or return is lower than the interest rate on the bond.

So the rate on the bond is the rate set by the FED. Hence the FED sets rates on bonds and it sets the base rate banks can lend at. The bond market sets the yields on bonds but this is an internal market event or a balance between supply and demand in the bond market.

[TommyJefferson]

$this->bbcode_second_pass_quote('Gideon', 'T')he Fed - evil pig faced bastards that they are - intentionally created a massive bubble by lowering borrowing rates so low so as to prompt a stampede of borrowing.

[clueless]

$this->bbcode_second_pass_quote('', 'W')e are talking about central bank base rates here. This is the minimum rate a member bank will loan at.

[Last_Laff]

Is this why Canadian interest rate went up the other day? The 70 dollar a barrel range makes it look cheap again.

[mkwin]

$this->bbcode_second_pass_quote('clueless', '')$this->bbcode_second_pass_quote('', 'I') buy a standard $100 10 year treasury bond in 2005. The rate is say 4%. Hence, I get 4% in two payments each year and my $100 back in 2015. However, if there is high demand from investors for that specific time period, bond the price of the bond will increase on the bond market. This would mean the price of the bond increases to say £110 dollars and the yield drops to 3.64 % - but only on the market. The new buyer would still get 4% p.a. from the FED but would only get $100 back in 2015 – hence he loses $10 on the purchase and the overall yield or return is lower than the interest rate on the bond.

So the rate on the bond is the rate set by the FED. Hence the FED sets rates on bonds and it sets the base rate banks can lend at. The bond market sets the yields on bonds but this is an internal market event or a balance between supply and demand in the bond market.

[mkwin]

$this->bbcode_second_pass_quote('clueless', '')$this->bbcode_second_pass_quote('', 'W')e are talking about central bank base rates here. This is the minimum rate a member bank will loan at.

[clueless]

$this->bbcode_second_pass_quote('', 'R')eal Estate is very cyclical as it is highly correlated with the economy. If the economy does well, generally real estate does well.

[shortonoil]

According to the official stance, there is no problem here folks, this CDO debacle is not going to spread.

Hedgefunds Problems Contained

Of course the next story down the list is:

Reuters

This $100 trillion dollar pyramid sets atop a $1 trillion dollar base. A base made up of 6 million home owners who shouldn’t have been given loans, and now, those homes represent negative equity. Inventories are at all time highs and prices have no where to go but down; dragging trillions of $ with them.

[mkwin]

$this->bbcode_second_pass_quote('clueless', '')$this->bbcode_second_pass_quote('', 'R')eal Estate is very cyclical as it is highly correlated with the economy. If the economy does well, generally real estate does well.

[clueless]

$this->bbcode_second_pass_quote('', 'T')his $100 trillion dollar pyramid sets atop a $1 trillion dollar base. A base made up of 6 million home owners who shouldn’t have been given loans, and now, those homes represent negative equity. Inventories are at all time highs and prices have no where to go but down; dragging trillions of $ with them.

[clueless]

$this->bbcode_second_pass_quote('', 'T')he banking system is highly regulated

[mkwin]

$this->bbcode_second_pass_quote('shortonoil', 'A')ccording to the official stance, there is no problem here folks, this CDO debacle is not going to spread.

Hedgefunds Problems Contained

Of course the next story down the list is:

Reuters

This $100 trillion dollar pyramid sets atop a $1 trillion dollar base. A base made up of 6 million home owners who shouldn’t have been given loans, and now, those homes represent negative equity. Inventories are at all time highs and prices have no where to go but down; dragging trillions of $ with them.

[clueless]

$this->bbcode_second_pass_quote('', 'T')he total value of those 6 million mortgages is, assuming average mortgages of £150,000, is

900,000,000,000 or $900 billion. Assuming 50% of those properties are re possessed and sold for 80% of their market value, there would be a loss of $90 billion.

A significant figure but hardly the cataclysmic. Considering we lost many trillions of dollars with the dotcom crash and this wasn't the end of the world.

[mkwin]

$this->bbcode_second_pass_quote('clueless', '')$this->bbcode_second_pass_quote('', 'T')he banking system is highly regulated

[shortonoil]

$this->bbcode_second_pass_quote('', 'C')ouple of points; 1) The central bank system is regulated - less so in the US than Europe but still regulated. The banking system is highly regulated. 2) Fractional lending has been around since the creation of the central bank systems. 3) The economy and the financial markets have been driven by a prolonged business cycle upturn. This is due to historically low inflation which is due to globalisation.

[clueless]

$this->bbcode_second_pass_quote('', 'S')ubprime is just that - subprime. Banks sell these loans to risky borrowers at a higher interest rate. Maybe 2-3% above the base rate. They then package them into MBS securities the structure looks like this: