Thursday, February 28, 2008
… and homeowners feel the squeeze
The other alarmist speech came from Hector Sants, FSA CEO. "I don't think markets are ever going to return to the way they were. The idea that at some point they will go back to normal, I think, is a misnomer." The era of cheap borrowing, he added, was over. That cannot be right either – or rather it is only right if you assume that the past three or four years were normal. By historical standards they were most abnormal for two reasons. The primary cause was abnormally low real interest rates, as you can see from the first graph. This shows real short-term interest rates in the developed countries. That dip of real rates to below 1 per cent for five years was the result of flawed central banking policies. YEESSSSSSSS!!