Interest rates close to right after last hike: Fed, Bernanke

Reuters via Yahoo! News ^ | March 21st, 2006 | Reuters

[economist-student]

We could default and get to keep all the foreign goodies! :) That would mean a stop to the economy but we could start from new. That also means higher savings rate and probably a new currency, something like the New dollar (it must be backed by gold in order to make international payments). The Fed wouldn't do this because it would mean lost of principal to their owners (the banks).

The fed is also tightening through other unconventional mechanism such as charging a fee for counting and replenishing old notes (as a side effect expect dirtier $10 and $20 notes in circulation) Here's the link: I Think they're doing that so that banks will have more available cash.

[RegulatorCountry]

"We could default and get to keep all the foreign goodies!"

I'm not following you here. China is certainly not going to come and repossess all the cheap plastic crap we've bought at Wal-Mart, lol.

[ARCADIA]

China is certainly not going to come and repossess all the cheap plastic crap we've bought at Wal-Mart, lol.

They will just nationalize the US "owned" factories that some idiots were stupid enough to build there.

[economist-student]

In Spain, a 400 euros a month flat sells for about 120,000-180,000 euros. This tells two things, either rents are too low or purchase prices are too high. I strongly believe it is the latter. The rent to sale price works out about the same as the P/E ratio in stocks.

Another way to evaluate RE, it's by calculating how much an average family spends each month on housing expenditures. If the RE "P/E" ratio is telling you that rents have to increase to something like 50-60% of monthly income, it is overvalued.

[Toddsterpatriot]

The only solution is either outright default to our foreign obligations or "inflate or die".

Why do we have to do either?

[economist-student]

One out of every four mortgages in the US is owned by a foreign entity. The same applies to the current account deficit. The Chinese central bank buys treasuries with recycled dollars and it finances US government spending (and to a lesser extent private consumption and investment)

[Petronski]

Why do we have to do either?

To keep away the Langoliers!

[Toddsterpatriot]

To keep away the Langoliers!

I hate those guys!!

[Alia]

I read somewhere today the goal post was 5.4%

[ARCADIA]

Why do we have to do either?

You have to do it because you are in debt and have to finance a trade imbalance in the amount of $65 billion a month. There are two ways to pay for the trade: 1) you print more paper money which delutes the value of paper assets - essentially deluting ownership in the US, or 2) you hike the rates and pay a higher premium to raise additional funds.

[Toddsterpatriot]

We're having no problem selling Treasuries so why do we need to raise rates? Our GDP is going to top $13 trillion this year so why do we need to print more money?

[expat_panama]

One out of every four mortgages in the US is owned by a foreign entity.

Is there a public source for that datum?