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Old 12-16-2014, 03:31 AM
 
283 posts, read 366,084 times
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I think rate will go down big time. Maybe next year we will have mortgage interest rate on 1% same as oil. If I am right and that going to happens I will take big mortgage next year.
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Old 12-16-2014, 03:37 AM
 
77,689 posts, read 76,699,732 times
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all we need is a flight to safety event and rates can fall. even at these low levels of interest the long treasury bond is up 25% this year in appreciation..

i don't think we will see 1% mortgages but i think we could see the long bond fall another 1% in a good downturn .

the feds fund rate has very little to do with where bond rates move to.

in fact the from 1980 to 2011 we saw the feds fund rate increase by 1% or more as many times at it fell. only in one year 1996 did bonds loose money when the feds fund rate went up.

most of the public gets this wrong and thinks when the fed raises rates all rates go up but that is not true. raising short term rates many times is looked at as holding down inflation and a good thing for longer term bonds.

right before the downturn we had the inverse yield curve where the fed was raising rates and bond investors basically said you are wrong to the fed and bid bond rates lower than short term rates.

Last edited by mathjak107; 12-16-2014 at 03:46 AM..
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Old 12-16-2014, 12:12 PM
 
13,156 posts, read 10,637,388 times
Reputation: 10286
Quote:
Originally Posted by Lincolnian View Post
Attention Federal Reserve: It's time to start moving the Fed Funds Rate up to 5%. That should translate into an 8% Prime rate.

Here's the rationale:

Real companies with real products and real earnings do not need cheap money they can borrow in order to stay in business. Companies like General Electric, United Technologies, Exxon, Kellogg, Walmart, McDonalds, etc. have traditionally done just fine with higher costs of capital.

Savers, like myself, are sick of our substantially less than the real rate of inflation returns that we have been stuck with as money has been passed out like candy by the banks to sketchy businesses, borrowers, and profiteers.

I think worthy financial institutions will agree that this scam has not added longterm value to their organizations as witnessed by the 70% decline in the value of financials and the "sitting-on-the-edge-of-ruin" financial condition of some of our largest and oldest financial institutions like Citibank, Bank of America, Bear Stearns (RIP), etc.

Other important reasons for higher rates:


The higher rates will attract greater foreign investment in our country's banks.

The higher rates will increase the value of our dollar against other currencies.

The higher rates will slow down the level of imports reducing the trade deficit

The higher rates will significantly reduce the speculative price inceases in crude reducing the cost to consumers.

The higher rates will fend off inflationary pressures.

The higher rates translated to higher yields on savings instruments and bonds will encourage greater saving rates by consumers.

The higher rates and resulting yields will improve the supplemental income of retired Americans.

Mr. Bernanke are you listening or are you too busy playing with your academic models and other toys you are unwilling to share?
You are forgetting something very important which is that a lot of government and institutional debt is not fully amortized and will have to be rolled over into new debt. If rates rise too rapidly for the system to adjust, shocks to the economy could result. A similar argument applies to those with HELOC's, ARM's or balloon notes.

I agree rates need to go up. Just don't do it too fast, otherwise you'll regret it!

P.S. Talk to Yellen, not Bernanke.
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Old 12-16-2014, 02:21 PM
 
13,156 posts, read 10,637,388 times
Reputation: 10286
Quote:
Originally Posted by ncole1 View Post
You are forgetting something very important which is that a lot of government and institutional debt is not fully amortized and will have to be rolled over into new debt. If rates rise too rapidly for the system to adjust, shocks to the economy could result. A similar argument applies to those with HELOC's, ARM's or balloon notes.

I agree rates need to go up. Just don't do it too fast, otherwise you'll regret it!

P.S. Talk to Yellen, not Bernanke.
EDIT: I didn't notice the thread was from 2008!
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Old 12-16-2014, 02:26 PM
 
13,156 posts, read 10,637,388 times
Reputation: 10286
Quote:
Originally Posted by teoreticar View Post
I think rate will go down big time. Maybe next year we will have mortgage interest rate on 1% same as oil. If I am right and that going to happens I will take big mortgage next year.
If it went to 1% on a 30 year fixed I'd try to convince my parents to borrow on their paid-off houses to invest. I highly doubt it will happen though.
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Old 12-16-2014, 05:28 PM
 
Location: Brawndo-Thirst-Mutilator-Nation
17,681 posts, read 17,749,595 times
Reputation: 14313
Not going to happen for quite a while..............maybe after the Demorats win 2016, MAYBE?
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Old 12-17-2014, 08:44 AM
 
9,999 posts, read 4,380,304 times
Reputation: 1972
Quote:
Originally Posted by ncole1 View Post
EDIT: I didn't notice the thread was from 2008!
<LOL>

The USD is strengthening enough right now from weakness elsewhere in the world, along with cheap oil. Inflation is still nominal, so increased central rates make less sense right now.

I would anticipate a slight boom with a Dem win in 2016 and Putin moderating. Then with resultant slight inflation aggravation here, higher rates. The Fed moving upwards in small increments a few percent.
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Old 12-20-2014, 09:41 AM
 
Location: San Diego California
6,797 posts, read 6,484,473 times
Reputation: 5180
Quote:
Originally Posted by Lincolnian View Post
Attention Federal Reserve: It's time to start moving the Fed Funds Rate up to 5%. That should translate into an 8% Prime rate.

Here's the rationale:

Real companies with real products and real earnings do not need cheap money they can borrow in order to stay in business. Companies like General Electric, United Technologies, Exxon, Kellogg, Walmart, McDonalds, etc. have traditionally done just fine with higher costs of capital.

Savers, like myself, are sick of our substantially less than the real rate of inflation returns that we have been stuck with as money has been passed out like candy by the banks to sketchy businesses, borrowers, and profiteers.

I think worthy financial institutions will agree that this scam has not added longterm value to their organizations as witnessed by the 70% decline in the value of financials and the "sitting-on-the-edge-of-ruin" financial condition of some of our largest and oldest financial institutions like Citibank, Bank of America, Bear Stearns (RIP), etc.

Other important reasons for higher rates:


The higher rates will attract greater foreign investment in our country's banks.

The higher rates will increase the value of our dollar against other currencies.

The higher rates will slow down the level of imports reducing the trade deficit

The higher rates will significantly reduce the speculative price inceases in crude reducing the cost to consumers.

The higher rates will fend off inflationary pressures.

The higher rates translated to higher yields on savings instruments and bonds will encourage greater saving rates by consumers.

The higher rates and resulting yields will improve the supplemental income of retired Americans.

Mr. Bernanke are you listening or are you too busy playing with your academic models and other toys you are unwilling to share?
Flawed philosophy. Your premise relies on the basis that the Federal Reserve should even exist which it should not. Interest rates should be a function of the free market.

So long as we have entities with vested interests interfering in free market fundamentals in order to manipulate the economy we will have ever increasing problems. Men are motivated by greed and the desire for power and not what is in the best interest of mankind as a whole.
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Old 12-20-2014, 09:43 AM
 
77,689 posts, read 76,699,732 times
Reputation: 54582
not being an economist i wouldn't even attempt to judge whether they should exist or not.

all i know is we are in a whole lot less bad than countries without them.
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Old 12-20-2014, 10:13 AM
 
8,925 posts, read 7,892,627 times
Reputation: 7305
It's moot. Europe, Switzerland, and Japan have negative rates. In addition to the rapid growth in the balance sheets of their central banks, that's been driving up the value of the US dollar. I've started seeing negative deposit rates in the US for large deposits (500K+).
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