Continued reports of an impending crisis, and what will the reaction of the world economy to the crisis one of the strongest economies of the world? Despite the debt in the U.S. $ 8 965 billion investment in the U.S. economy only increased.
The long-awaited decision of the U.S. Federal Reserve to lower interest rates have not yet led to any positive reaction in the market, although the decline was large enough and exceeded the expectations of many analysts. The decline rate from 5.25% to 4.75% - this is quite a serious step, but may be insufficient to improve the situation. It is likely that the Fed will lower your rate and more, seeking rather to correct the status quo.
A situation is not the best way. At one time, in 2002-2004, thanks to the interest rate on loans of American banks was very low, the mass of low-income families to obtain loans for housing, as well as that of the creditor banks and the borrowers themselves were confident that serve a «cheap» credit they can. However, as it turned out later, this belief rests on a precarious foundation. Banks are issuing mortgage loans, had been in the loan agreement is not fixed and floating interest rate, which is quite natural - the banks are insured against interest rate risk, ie of the profit shortfall because of the potential growth rates in the future. But the floating rate has been quite nepodemnoy for borrowers when it is at the level of 1% per annum has risen to the level of 5% per annum (here referring to the Federal funds rate, by the same banks lend to customers at a higher rate using the Federal funds rate as a baseline). After such growth rates revealed that low-yield family can not pay it, and a large number of credit agreements commenced non-payment. As a result, instead of hypothetical lost profits, banks began to get very real losses.
Further well-known. Once the information on the adverse situation of the banks entered the market rates of their shares were to fall rapidly, tascha for themselves and the general stock market index. In turn, the fall of the stock index could adversely affect the financial situation of the already large circle of family, not just low-income households - for millions of American families have owned shares and, most importantly, these actions put to commercial banks under the provision of consumer credit by the American family is actively used. And in terms of consumer loans, if the value of the security will decrease (ie, stock prices will fall), the borrower must make, or collateral, or pay part of the debt. Of course, to comply with these conditions can not all households, and hence the risk of default on loans extended to a larger number of borrowers, not only indebted to the mortgage.
Here is the risk of default on consumer loans because of falling share prices and forced the leadership of the Fed to reconsider its policy on interest rates and a move away from their raise to the next lower. Decreasing the base interest rate (ie, making «less money»), the Fed automatically raised the cost of capital (ie, raise share prices on the American Stock Exchange). This increase, in turn, increase the value of available for consumer loans, and U.S. households will not need to urgently seek means to make additional security.
Thus, one can say that the current problems facing the U.S. economy, the Fed agreed to, although whether this is a reduction of rates is unknown. For many borrowers, and 4.75% per annum are certainly very high rate, to pay that they are unable to, so the Fed can continue to reduce it further. But this decline will allow only razgresti situation and not cause a wave of bankruptcies of households-borrowers and banks. But whether it will help correct the situation in the American economy as a whole - is a big issue.
We have repeatedly had to write that so-called «growth» in the United States, which allegedly began after 2002, when the administration of George Bush, Jr.. became the lead of the package of measures to stimulate the economy, caught in the depression following the collapse of the Internet bubble in 2000 and the terrorist attacks in 2001, was not growth, but the so-called «soft landing». The fact is that American corporations during the period of the previous economic expansion (and this was indeed the rise) accumulated mass of unsold goods and mass nesamortizirovannogo productive capital. And they had to help get rid of excess stocks of goods and surplus stock of capital.
This escape occurred on the already well-known scheme, which was mainly in lower interest rates, it is cheaper money capital. Falling interest rates made credit more accessible, and that the availability of credit, first, allowed corporations to save on refinancing of stock until they sell, and secondly, has enabled American households to increase its debt and, accordingly, to increase the procurement of goods and third , provided an opportunity for the federal budget to expand the U.S. national debt, and also, in turn, increase their purchases.
Thus, the artificial expansion of the purchasing power of the two major sectors - households and public administration - the corporation could sell its inventory and fully or partially samortizirovat excess productive capital. After that could be considered that the «soft landing» completed.
When the U.S. administration and the Fed understand that corporations are no longer any serious risk, they decided that it was time to switch to the elimination of side effects, without which no cost, no politics. In this case the side effect of inflation, since money injected into the treatment is too active. And if the elimination of excess inventory is used reducing the interest rate, then later for the elimination of excess money supply interest rates began to improve. Inflation is really muffle, but brought to life the other side-effect of defaults on mortgage loans, the cost of services which has become unmanageable for many borrowers. So now the Fed once again have to lower your interest rates, choose between default on loans and inflation in favor of the latter. Otherwise the consequences for the U.S. economy would be too sad.
The long-awaited decision of the U.S. Federal Reserve to lower interest rates have not yet led to any positive reaction in the market, although the decline was large enough and exceeded the expectations of many analysts. The decline rate from 5.25% to 4.75% - this is quite a serious step, but may be insufficient to improve the situation. It is likely that the Fed will lower your rate and more, seeking rather to correct the status quo.
A situation is not the best way. At one time, in 2002-2004, thanks to the interest rate on loans of American banks was very low, the mass of low-income families to obtain loans for housing, as well as that of the creditor banks and the borrowers themselves were confident that serve a «cheap» credit they can. However, as it turned out later, this belief rests on a precarious foundation. Banks are issuing mortgage loans, had been in the loan agreement is not fixed and floating interest rate, which is quite natural - the banks are insured against interest rate risk, ie of the profit shortfall because of the potential growth rates in the future. But the floating rate has been quite nepodemnoy for borrowers when it is at the level of 1% per annum has risen to the level of 5% per annum (here referring to the Federal funds rate, by the same banks lend to customers at a higher rate using the Federal funds rate as a baseline). After such growth rates revealed that low-yield family can not pay it, and a large number of credit agreements commenced non-payment. As a result, instead of hypothetical lost profits, banks began to get very real losses.
Further well-known. Once the information on the adverse situation of the banks entered the market rates of their shares were to fall rapidly, tascha for themselves and the general stock market index. In turn, the fall of the stock index could adversely affect the financial situation of the already large circle of family, not just low-income households - for millions of American families have owned shares and, most importantly, these actions put to commercial banks under the provision of consumer credit by the American family is actively used. And in terms of consumer loans, if the value of the security will decrease (ie, stock prices will fall), the borrower must make, or collateral, or pay part of the debt. Of course, to comply with these conditions can not all households, and hence the risk of default on loans extended to a larger number of borrowers, not only indebted to the mortgage.
Here is the risk of default on consumer loans because of falling share prices and forced the leadership of the Fed to reconsider its policy on interest rates and a move away from their raise to the next lower. Decreasing the base interest rate (ie, making «less money»), the Fed automatically raised the cost of capital (ie, raise share prices on the American Stock Exchange). This increase, in turn, increase the value of available for consumer loans, and U.S. households will not need to urgently seek means to make additional security.
Thus, one can say that the current problems facing the U.S. economy, the Fed agreed to, although whether this is a reduction of rates is unknown. For many borrowers, and 4.75% per annum are certainly very high rate, to pay that they are unable to, so the Fed can continue to reduce it further. But this decline will allow only razgresti situation and not cause a wave of bankruptcies of households-borrowers and banks. But whether it will help correct the situation in the American economy as a whole - is a big issue.
We have repeatedly had to write that so-called «growth» in the United States, which allegedly began after 2002, when the administration of George Bush, Jr.. became the lead of the package of measures to stimulate the economy, caught in the depression following the collapse of the Internet bubble in 2000 and the terrorist attacks in 2001, was not growth, but the so-called «soft landing». The fact is that American corporations during the period of the previous economic expansion (and this was indeed the rise) accumulated mass of unsold goods and mass nesamortizirovannogo productive capital. And they had to help get rid of excess stocks of goods and surplus stock of capital.
This escape occurred on the already well-known scheme, which was mainly in lower interest rates, it is cheaper money capital. Falling interest rates made credit more accessible, and that the availability of credit, first, allowed corporations to save on refinancing of stock until they sell, and secondly, has enabled American households to increase its debt and, accordingly, to increase the procurement of goods and third , provided an opportunity for the federal budget to expand the U.S. national debt, and also, in turn, increase their purchases.
Thus, the artificial expansion of the purchasing power of the two major sectors - households and public administration - the corporation could sell its inventory and fully or partially samortizirovat excess productive capital. After that could be considered that the «soft landing» completed.
When the U.S. administration and the Fed understand that corporations are no longer any serious risk, they decided that it was time to switch to the elimination of side effects, without which no cost, no politics. In this case the side effect of inflation, since money injected into the treatment is too active. And if the elimination of excess inventory is used reducing the interest rate, then later for the elimination of excess money supply interest rates began to improve. Inflation is really muffle, but brought to life the other side-effect of defaults on mortgage loans, the cost of services which has become unmanageable for many borrowers. So now the Fed once again have to lower your interest rates, choose between default on loans and inflation in favor of the latter. Otherwise the consequences for the U.S. economy would be too sad.
No comments:
Post a Comment