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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Jeff Hayden who wrote (211997)	12/18/2012 1:47:43 AM
From: Maurice Winn	2 Recommendations Respond to of 541202

It was obvious to me that Big Al KBE should have raised interest rates sooner than he did after the biotelecosmictechdot.com collapse < It's clear he should have let the rates rise to levels painful enough that people wouldn't borrow mortgage money - but he was so anti-inflation, keeping rates moderate to low, that he did fire-up the housing bubble anyway.> But those low interest rates did not induce me to borrow money to pay too much for a house. So why did others choose to bid stupidly high prices? The decision and reasons were between their ears. There was no obligation to do so. People bid prices without thought - expecting somebody else to limit their pricing decisions, even though they were the people doing the bidding. I could now borrow money but still choose not to do so. That's because I expect interest rates to rise - as is obvious they must do because people will not learn, work, save and lend at 0% interest. That is too much like hard work for no reward while suffering dilution and risk of capital loss. Interest rates might remain low for years, in a deflationary context, but as soon as it's not deflationary, look out. Maybe Big Al KBE should have known that interest rates were too low and that house prices were too high, but it's a very risky thing to depend on somebody else to make such decisions when borrowing big heaps to buy a house. Especially when Big Al's job is to make money for the Federal Reserve banks, not the borrowers. I even wondered whether keeping interest rates low was an attempt to get George W Bush re-elected by keeping the game going a bit longer. The same in Y2K when it seemed interest rates should be lowered - I wondered whether it was in the hope of keeping money tight so that Al Gore would lose the election in favour of George W Bush. That was probably overly cynical, but I'm suspicious when good sense seems not to apply. Mqurice