Thursday, February 15, 2007
The interest rates arms race has begun….
Two major things are going to happen here.1. All major central banks are going to be forced to keep raising rates to protect their domestic currency. No one can risk international investors fleeing their currency.2. Credit Spreads are going to widen, i.e. the difference between what a retail bank borrows from the Central Bank at and what it lends to the sheeple at. This is usually a measure of accepted credit qality of a population.This will have to happen to cover the bad losses, especialy in sub-prime home loans (mortgages)