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Dec 16, 2008 by Yahoo KOL | Posted in Renting & Real Estate
They are planning to desert it to 1/2% Can they go below zero?
If they went below zero they would have to pay banks to borrow money.
I bought a home in 2003 and financed at 4.85% when the Fed estimate was 2%. Now the banks wont drop the rate even though the Fed is down to 1%
I think the Fed needs to bypass the banks and suitable to directly do you agree? Who needs the banks to make a huge profit and ruing the economy?
The federal funds price could theoretically go to 0%. they would never go negative and pay people to borrow money, although they could lend money for free. I contrive they'll keep it above 0%, but I wouldn't be surprised to see it as low as .25% or even .125% at some point.
The federal funds rate has very particle to do with the market rates on mortgages other than that when interest rates are low, all rates tend to be low and when rates are high, it tends to select all types of interest rates.
Mortgage rates are determined like any other investment. Its risk verses recompense. Mortgage backed bonds and whole mortgages used to be seen as very low risk investments, which is why people and banks were happy to invest into mortgages at rates that barely beat inflation (inflation is about 4% per year on common). However, mortgages are now a more risky investment, so they must therefore pay higher rates of return to attract investors.
SmartA$$ | Dec 16, 2008
They can go to 0%.
Angel Aries | Dec 16, 2008
How does the money transfer between the Fed and Treasury?
Oct 29, 2008 by Loveen | Posted in Economics
When the T-bonds in the Fed's account maturate, will the goverment pay to the Fed? If it will, how does the Fed use the money from the government? If the Fed then transfer the money to the government, does it mean that we all pay an inflation tax?
While the FED does clutch some of the treasury bonds, it is hardly the sole holder, and is as likely to buy it's holdings from the market as it is directly from the bank.
That said, when the bills and bonds held by the FED come due, the treasury must re-pay the FED the same as it would any other lender. It can re-pay with tax receipts or with new borrowings.
The 'inflation tax' occurs as a consequence of monetary policy on the part of the FED, not necessarily the result of it's treasury holdings, although the FED selling treasury bonds on the market-place is one way it increases monetary supply (causing inflation).
Hopefully that helps, perhaps a link to a more professional situate will help:
First on money supply, the FED in general, the tresury department bureau of public debt.
robrobiii | Oct 29, 2008
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