Banks--- Betting on the recovery Message Board

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Non-Tech : Banks--- Betting on the recovery

WFC 87.12

-0.3%

Nov 4 3:59 PM EST

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To: Road Walker who wrote (1214)	11/17/2010 4:48:02 PM
From: tejek	Read Replies (1) of 1428

Interesting premise posed in this paper. Compound Interest: Artificially Low? Last Updated Nov 2010 In 2002-2004, demand for loans reacted to lower prices in the expected manner. So why is demand for borrowing failing to react to the Fed’s stimulus today? Some point to consumers’ inability to borrow due to weak housing valuation, but the more important reason is a lack of investment opportunities. While household balance sheets are weak, corporate balance sheets are strong and should be well positioned to increase leverage. However, there are few opportunities for corporations to invest borrowed funds profitably, even at today’s extremely low rates. Note that nominal GDP growth is expected to be just 3.9% in 2011, according to a Bloomberg survey. As the primary measure of national income, the growth of GDP can be viewed as the economy-wide return on our collective assets. Contrast this with the Fed’s other ultra-low rate policy period. In the second half of 2003, GDP growth was 7.6% (annualized) and 6.4% for all of 2004. read more............. brownadvisory.com

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