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Politics : Formerly About Advanced Micro Devices

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To: tejek who wrote (367169)	1/17/2008 12:22:06 AM
From: bentway	Read Replies (2) of 1576226

"Low interest rates don't create bubbles" The lowest interest rates in fifty years got people to buy a LOT of houses, many with ARMS, that they really couldn't afford. Greenspan even urged people to use ARMS instead of fixed rates mortgages! The low interest rates was like throwing gasoline on the housing bubble fire. You can really be obtuse when you want to be. Bubbles aren't a good thing overall. en.wikipedia.org "Another important aspect of economic bubbles is their impact on spending habits. Market participants with overvalued assets tend to spend more because they "feel" richer (the Wealth Effect). Many observers quote the housing market in the United Kingdom, Australia, Spain and parts of the United States in recent times, as an example of this effect.[citation needed] When the bubble inevitably bursts, those who hold on to these overvalued assets usually experience a feeling of poorness and tend to cut discretionary spending at the same time, hindering economic growth or, worse, exacerbating the economic slowdown. Therefore, it is imperative for the central bank to keep its eyes on asset price appreciation and take measures to curb high levels of speculative activity in financial assets.[citation needed] This is usually done by increasing the interest rate (that is, the cost of borrowing money)."

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