A Quote by Harry Enfield
According to the Bank of England the economy is growing too fast so interest rates must rise to counter the supposed inflationary threat.
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According to the Bank of England the economy is growing too fast so interest rates must rise to counter the supposed inflationary threat. In lay terms, I interpret this to mean that people are working much harder, causing economic growth, and they're in danger of spending their money, which is what the recession-hit shops want them to do. But the Bank and the City seem to think this is wrong, and that if people work harder they should be punished by having their mortgages increased.
It has been said that the Fed's job is to take the punch bowl away just as the party gets going, raising interest rates when the economy is growing too fast and inflation threatens.
Stock price multiples are negatively correlated with real interest rates. As interest rates rise, the market multiple will fall.
The supply-side effect of a restrictive monetary policy is likely to be perverse, in that high interest rates enter into costs and thus exert inflationary pressure.
Student debt is crushing the lives of millions of Americans. How does it happen that we can get a home mortgage or purchase a car with interest rates half of that being paid for student loans? We must make higher education affordable for all. We must substantially lower interest rates on student loans. This must be a national priority.
I think the concern over rising interest rates is ahead of itself because I think inflationary fears themselves might be premature.
The underlying strategy of the Fed is to tell people, "Do you want your money to lose value in the bank, or do you want to put it in the stock market?" They're trying to push money into the stock market, into hedge funds, to temporarily bid up prices. Then, all of a sudden, the Fed can raise interest rates, let the stock market prices collapse and the people will lose even more in the stock market than they would have by the negative interest rates in the bank. So it's a pro-Wall Street financial engineering gimmick.
An overheating economy, characterized by accelerating inflation and rising interest rates, is another precondition for recession. This doesn't describe today's economy.
Low interest rates are a big opportunity for investment. But the issue is that this money should go to the real economy, not the financial economy.
Since 2008 you've had the largest bond market rally in history, as the Federal Reserve flooded the economy with quantitative easing to drive down interest rates. Driving down the interest rates creates a boom in the stock market, and also the real estate market. The resulting capital gains not treated as income.
The real challenge was to model all the interest rates simultaneously, so you could value something that depended not only on the three-month interest rate, but on other interest rates as well.
The Fed contributed to the financial crisis, keeping interest rates too low for too long. I give them credit for responding and stabilizing the economy and the financial sector during the crisis. But then they tried to do too much with quantitative easing that went on forever, just dramatically exploding their balance sheets.
The supply-side effect of a restrictive monetary policy, moreover, is likely to be perverse. High interest rates enter into costs and thus exert inflationary pressure, as well as inhibiting the expansion of capacity or the introduction of cost -reducing capital improvements.
Government should eschew suasion and directives to banks on interest rates that run counter to monetary policy actions.
And so the danger for the housing industry is if we see interest rates rise.
A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank.
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