Clown-Free Zone... sorry, no clowns allowed Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Les H who wrote (203012)	11/7/2002 10:27:59 AM
From: Perspective	Read Replies (2) of 436258

Interesting - hadn't thought about the interest rate sweet spot for banks. At first rate decreases cause increased profits through wider interest margins, as interest rates paid drops faster than interest rates charged. But then you hit a point where you can't reduce interest paid any further. Either interest rates received drops, and bank profitability drops, or interest rates received becomes sticky, reducing transactional volume and bank profitability and inhibiting transmission of the Fed cut into the real economy. I think we are at that point now. I intuitively felt that the liquidity trap would be set with the Fed funds at some point in the 100-200 basis point range, but I didn't have a good reason why. Perhaps this is key. It's also entertaining (kinda like watching a horror movie is entertaining) to look at corporate bond yields. Despite the plunge in 10yr treasury yields, corporate yields are still at or above the lows of the 1990s: economagic.com economagic.com economagic.com BC

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next