KillerApps Macro: Money and Credit
Easy money has unintended consequences.
Speculative capital inflows have wreaked havoc in the destination economies.
Some financial institutions could commit moral hazard by leveraging their implicit high credit ratings and tax-payer guarantees to load up on high-risk debts and obligations.
Run-away securitization of housing mortgages abetted by loose credit rating, shaky credit default swaps, and cheap money led to a huge housing bubble in the US.
Even with short-term interest rates close to zero, the US economy has failed to respond to cheap money because of anemic bank lending.
Bond rating agencies found it hard to serve both the interests of bond investors and bond issuers since they were directly paid by bond issuers for favorable ratings.
The leverage cycle could amplify business cycles apart from routine monetary policies via interest rates.
Banks may be able to expand money supply through fractional-reserve loans, but more and more loans and other financing are channeled through the non-bank finance sector.
Treasury bonds are important instruments in regulating the money supply.
Savers are collateral damage in the Fedís attempt to resuscitate a comatose economy during the Great Recession.
Bonds and stocks are alternative means of business financing where bonds offer steady income while stocks offer potentially substantial capital gains to investors.
The yield curve depicts how yields of Treasury debts vary with their borrowing durations.
Securitization of mortgage loans has fueled a US housing bubble whose bursting has put one in four mortgages under water.
The low interest rates intended to stimulate the recessed US economy after the US housing bust in 2007 Ė 2009 have inadvertently led to a housing boom in Hong Kong when Hong Kong has to lower its interest rates to defend its dollar peg.
Unregulated credit default swaps (CDS) gave shaky coverage to subprime loans.
The volume of credit card solicitations is an indicator of the cycle of credit expansion and credit contraction.
Total 16 records
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