I know members here come from various backgrounds, before I got into this I did engineering and project management in the nuclear industry. If there is anybody here with a background in economics, could I get an answer to a question that has been bugging me for a couple of years now?
With the current economic situation, banks and other lenders are hesitant to lend money, even to businesses and people that have a decent credit history. The governments response has been to keep pushing interest rates down. I would think that lowering interest rates would be a strategy to employ if you had a shortage of potential borrowers. In our current situation we have a shortage of willing lenders. I would think that lenders would be much more eager to lend money at a little higher rate. If 30 yr conventional mortgages were at say 7 or 7.5 percent the risk would look much more tolerable than at 4.5 percent. Would not slightly higher interest rates encourage lending and subsequently spur economic activity? As an investor I am much more likely to invest in a moderate risk a 7% return than I would be at the same risk for 4 percent.
With the current economic situation, banks and other lenders are hesitant to lend money, even to businesses and people that have a decent credit history. The governments response has been to keep pushing interest rates down. I would think that lowering interest rates would be a strategy to employ if you had a shortage of potential borrowers. In our current situation we have a shortage of willing lenders. I would think that lenders would be much more eager to lend money at a little higher rate. If 30 yr conventional mortgages were at say 7 or 7.5 percent the risk would look much more tolerable than at 4.5 percent. Would not slightly higher interest rates encourage lending and subsequently spur economic activity? As an investor I am much more likely to invest in a moderate risk a 7% return than I would be at the same risk for 4 percent.
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