Thursday, Sep 30, 2010
How interest rates work...
G Pytel: The financial system, as we know it, is dead
A very lucid summary how setting up interest rates used to work, why banks followed them with mortgages, why it does not work anymore and why we are in the mess. A must read for any mortgage holder.
Posted by ant @ 07:16 PM (785 views) Add Comment
5 Comments
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1. stillthinking said...
He doesn't make sense. He suggests excessive credit expansion at the same time as disappearing deposits. Where does this money go then? You could make the argument that doesn't make a distinction between the UK and abroad, but if he doesn't then what is he saying?
I give up on him personally.
2. devo said...
I liked this:
The current governments’ actions of pouring taxpayers money (through quantitative easing, financial stimuli and spending cuts) are nothing more than pathetic attempts to revive rotting and smelly corpse of the pyramid scheme.
3. ant said...
@stillthinking: it is about relative credit expansion, i.e. massive growth of money multiplier. And where did the cash (rather than money to be precise) go anyway? Ever heard about offshore financial centres and shadow banking?
It all makes sense: deposits did not disappear. Simply banks might not have enough cash to service them (too big money multiplier, in simplified terms, too little cash spread across to many deposits)
4. Doggum said...
I agree with stillthinking! Very muddy article with little to recommend itself!! Poor!!
5. ant said...
@Doggum: your comment is muddy and poor:-) As you do not explain what is muddy or poor? (If you do not understand it or find it muddy, it may well be your limitation.)