A Quote by James Grant
The art of banking is always to balance the risk of a run with the reward of a profit. The tantalizing factor in the equation is that riskier borrowers pay higher interest rates. Ultimate safety - a strongbox full of currency - would avail the banker nothing. Maximum risk - a portfolio of loans to prospective bankrupts at usurious interest rates - would invite disaster. A good banker safely and profitably treads the middle ground.
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A higher IOER rate encourages banks to raise the interest rates they charge, putting upward pressure on market interest rates regardless of the level of reserves in the banking sector. While adjusting the IOER rate is an effective way to move market interest rates when reserves are plentiful, federal funds have generally traded below this rate.
We must fundamentally restructure our student loan program. It makes no sense that students and their parents are forced to pay interest rates for higher education loans that are much higher than they pay for car loans or housing mortgages.
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.
If you are prepared for some risk, junk bonds pay about 5%, but they tend to get whacked when interest rates rise. Same with lower-yielding but higher-quality corporate bonds.
Credit card companies are jacking up interest rates, lowering credit limits, and closing accounts - and people who have made timely payments are not exempt. So even if you pay off your balance - and that's tough when interest rates are insanely high - there's a good chance your credit limit will be slashed, and that will hurt your FICO score.
Of course, looking tough on inflation is part of any central banker's job description: if investors believe that inflation is going to get out of control, you end up with higher interest rates and capital flight, and a vicious circle quickly ensues.
The risk is that as we come out of this recession, we'll have so much debt to finance, we'll either have to have inflation or very high interest rates to continue to borrow the money, or both. That's a risk.
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.
I mean, I'm a conservative. I believe that, you know, if you borrow too much, you just build up debts for your children to pay off. You put pressure on interest rates. You put at risk your economy. That's the case in Britain. We're not a reserve currency, so we need to get on and deal with this issue.
When interest rates are high you want the average direction in which interest rates are moving to be downward; when interest rates are low you want the average direction to be upward.
The degree of monetary policy ease should be associated with the level of real interest rates, not nominal interest rates.
Stock price multiples are negatively correlated with real interest rates. As interest rates rise, the market multiple will fall.
And so Fannie Mae produces very strong results for investors in - when interest rates are high and when interest rates are low, in recession and during booms.
I was absolutely astonished and could not believe my eyes at the outrageous interest rates that people in need have to pay to get loans.
It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay; but one promise fattens the usurer (banker), and the other helps the people. If the currency issued by the Government were no good, then the bonds issued would be no good either. It is a terrible situation when the Government, to increase the national wealth, must go into debt and submit to ruinous interest charges at the hands of men who control the fictitious values of gold.
If you let interest rates be freed, be set by the free market, they would rise dramatically. There would be a lot of broken furniture on Wall Street. It needs to be broken. The back of the speculative bubble would be broken and we could slowly heal the financial system. That's what I think we need to do but it's never going to happen because there's trillions of asset values dependent on the Fed continuing to suppress, repress interest rates and shovel $85 billion a month of liquidity into the market.
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