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It's not just private Americans who have too much debt...
Corporations and governments with "good credit" can borrow at 1%. They can have $10 million in outstanding debt, and many corporations and governments have that or more.
What happens when the rate of interest goes to 2% for those with "good credit," a mere 1% rise?
As an example, the interest payment required to keep an outstanding $10 million debt now doubles to $200,000. If the debtor can't come up with the extra $100,000, the only way to reduce their carrying costs, other than bankruptcy, is to pay down $5 million of that $10 million debt.
But they don't have that $5 million; it's already been spent. That was, after all, the entire point of borrowing the $10 million.
This is the trap The Federal Reserve is in, and from the size of it (much larger than the $10 million example I gave) you should easily be able to see the problem: Even a modest increase in interest rates, for example just a 1% increase, will drive "good credit" borrowing costs in the short term to roughly 2% or so, which will instantly double the interest dueor force a paydown of half of the outstanding debt.
The latter is impossible because the money has already been spent, and therefore the former is also impossible. It's a TRAP.
It's not just private Americans who have too much debt...
Corporations and governments with "good credit" can borrow at 1%. They can have $10 million in outstanding debt, and many corporations and governments have that or more.
What happens when the rate of interest goes to 2% for those with "good credit," a mere 1% rise?
As an example, the interest payment required to keep an outstanding $10 million debt now doubles to $200,000. If the debtor can't come up with the extra $100,000, the only way to reduce their carrying costs, other than bankruptcy, is to pay down $5 million of that $10 million debt.
But they don't have that $5 million; it's already been spent. That was, after all, the entire point of borrowing the $10 million.
This is the trap The Federal Reserve is in, and from the size of it (much larger than the $10 million example I gave) you should easily be able to see the problem: Even a modest increase in interest rates, for example just a 1% increase, will drive "good credit" borrowing costs in the short term to roughly 2% or so, which will instantly double the interest dueor force a paydown of half of the outstanding debt.
The latter is impossible because the money has already been spent, and therefore the former is also impossible. It's a TRAP.
An intelligent entity uses these things called risk controls.
While they might borrow ten million at 1%, they'll do so as they find they can make more using that money elsewhere.
They'll also make sure they have enough that is accessible should they need to make a payment (note these interest rates are often also locked in for a period of time, so the entity would have a plan for when that period ends).
An intelligent entity uses these things called risk controls.
While they might borrow ten million at 1%, they'll do so as they find they can make more using that money elsewhere.
They'll also make sure they have enough that is accessible should they need to make a payment (note these interest rates are often also locked in for a period of time, so the entity would have a plan for when that period ends).
That's just wishful thinking. Because if that were actually true, The Fed would have raised rates by now. Note that they haven't.
If taxes are at some of their lowest levels in history, and the wealthiest in this country are richer than ever, why hasn’t the growth in the wealth of the middle class matched that of the top 2%?
#Exposing Republican Lies#
Haha .... Your ignorance may be too vast to overcome. Supply side economics doesn't work when Government is the source. Please tell us what the Corporate tax rate is in this country.
You might want to educate yourself on the term "Stagflation", that is much more representative of what has been going on in this Country the last six years. Nice try though.
Both sides have their hand in it. I'm just less inclined to agree with the right's economic principles post-Clinton.
The middle and lower classes have been hurting before Obama, it's just more pronounced now. Wages have been stagnating for decades, benefits have been reducing for decades, and cost of living has been rising. On top of that, Americans have a lot of private debt.
There's a good deal of self infliction with market forces increasingly putting developed countries' workers at a disadvantage. We need to shore up entitlements, reform how we do welfare, rebuild our infrastructure, and reform and simplify the tax code from a governmental policy standpoint.
Not really.
Very few on the left was complaining about what Obama was doing to make the harm being done to the middle and lower classes more pronounced.
It hasn't worked yet because unions need to be punished more, public education has to be defunded more, and we need another war on a credit card. Then maybe it will start working!
Rowan county increased Real Estate Tax rates using the old line that it was revenue neutral, increased sales taxes to adjust for lost state funding, increased property rates.
Check out your county and if you live in a city the city rates.
Between these and the loss of deductions in the state flat tax the majority of the state has seen less of their income. GOP = fiscal conservative not in my lifetime.
My county has NOT experienced ANY of those. Thank you repubs.
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Because if that were actually true, The Fed would have raised rates by now. Note that they haven't. 
