I really have no idea what you're asking. The Feds said interest rates would remain low for an extended period and Hoening said the Feds recent policy of QE2 could cause an increase in long term inflation expectations that could destabilize the economy. So what don't you understand?
You agree with both positions. Both positions reside in opposite ends of the economic universe. If long term interest rate expectations remain low, that means long term inflation expectations will remain low. Interest rates are derived from inflation expectations.
"Price Inflation greatly effects time value of money (TVM). It is a major component of interest rates which are at the heart of all TVM calculations.
Actual or anticipated changes in the inflation rate cause corresponding changes in interest rates."
Effect of Inflation on Interest Rates
High inflation and high unemployment are the key to stagflation, not high interest rates.
I don't like wikipedia as a research tool because of the wiki vandalism... however here is the first sentence in the wiki link you provided "In economics, stagflation is the situation when both the inflation rate and the unemployment rate are high."
This seems to highlight an important concept that you don't seem to understand:
Interest rates are directly related to the rate of inflation.
So if you can find anywhere in this definition of stagflation below, that high interest rates are key to stagflation, then by all means, do let me know.
Seriously, how do you profess to understand anything about economics and not understand the simple correlation between interest rates and inflation? In your world, how are interest rates set?
"First, interest rates DO rise as a result of inflation."
The Business Desk with Paul Solman | Online NewsHour | PBS
Paul Volker had to actually raise interest rates higher in order to shock the economy out of stagflation in the early 1980s.
Again you don't seem to understand how interest rates and inflation and the economy are intertwined.
"So how do interest rates affect the rise and fall of inflation? Like we said earlier, lower interest rates put more borrowing power in the hands of consumers. And when consumers spend more, the economy grows, naturally creating inflation. If the Fed decides that the economy is growing too fast-that demand will greatly outpace supply-
then it can raise interest rates, slowing the amount of cash entering the economy."
HowStuffWorks "Interest Rates and Inflation"
How does removing money from the system stimulate the economy and shock the system out of stagflation? How does decreasing a business ability to borrow, allow that business to expand, buy more things, and hire new people? It doesn't.
Well, I'm not a banker if that whats you mean. Are you? The reason I said what I did is because the banks aren't lending and if they aren't lending then people don't have access to money to buy homes, refinance or expand businesses.
You said, and I am paraphrasing here, but please reread what you actually wrote, that most of the
money is in the hands of the few and they refuse to spend it. It reads like you are stating there should be a redistribution of money because the people who have money are not spending enough. Banks do not spend the money, they lend it.
because the recession destroyed their credit rating.
No, individual decisions destroyed people's credit rating. Living outside of their means finally caught up to people. We, me and you, are all living in the same economy. Why do you have a problem with getting a refi, but I have been pre-approved for 500K (with 20% down) for an investement property? People need to take responsibility for their own financial being, and
blaming the recession for not having a good credit score is like blaming the Ferrari dealership for reposessing the car you couldn't afford.
even people with excellent credit scores are finding hard to refinance with the low interest rates because the banks are devaluing their homes so their equity ratio is lower and they don't qualify for the loan.
Where do you get your stuff from? A BPO that banks use to determine home value is from a mortgage broker... Banks don't price the home, you did when you bought it, and your neighbor when he bought his home...
I think QE2 will be good for Wall Street but not so much for Main Street where it will still take years to recover.
What does that even mean?
SKT is a corporation that trades on the NYSE. It is the owner of malls and outlet centers. How does that wall street stock benefit if the shops inside their centers do not benefit? How does the average citizen NOT benefit when the stock market makes moves upward? Where is your 401K, IRA, retirement account? How do stock prices move upward if earnings go down?
Do you understand that "main street" buys the things from the companies on "wall street"? If everyone on mainstreet stopped buying Coke, how does that benefit wall street?
One of the reasons the banks aren't lending is because they raised their borrowing standards so high that now fewer people can qualify for a loan
I am not a supporter of the banks as they helped put us where we are today. You say they "raised" the standards implying that you are entitled to the loan. The truth is they returned to better lending standards. If you don't understand that it was lending money with low standards which put us in this mess that we are in today, please say so here. If you can accept that the poor standards which brought on this problem then why should the banks NOT have ammended their lending standards?
I'm sorry you had a hard time getting your refi, but a loan is a privielage not a right.
Did I say the government needed to stimulate me to buy something?
Yes, you implied it. Maybe I misunderstood your writing. "I kinda figured they would since the Feds want people to spend instead of save. It will also probably help the government pay down the trade deficit. But
I don't see it doing much to stimulate utilization of production or lower unemployment."
If you want to buy something, then buy it. If you need to be stimulated to buy it, then you probably don't need it.
I agree, an organic economic pace is better, but then the financial crisis wasn't exactly a natural cause, so why should the recovery be?
That past 3 recessions have been followed with continued stimulus though the better part of cycle. This was the 4th. We do not have any reserve left. The comments from the IMF, Moody's, S&P, all show the actual risk we are facing. To throw caution to the wind so you can get to where you want the economy to be through government spending does not fix the fundamental flaws. The economic rules do not change because the pressure placed on the economy snapped from expanded debt. To further add debt does not bring you to a better place.