brianoh

Bracing for Another Round of Credit Related Woes

One major point is that the Fed Rate of 2% improves bank's profitability, or at least reduces their losses. The spread between what they pay and what they receive on mortgages is very high. This means that those with cash are paying for their losses on bad loans. As for stocks, it is a question of what are reasonable PE ratios. Based on historical rates stocks are at least 30% overpriced and the Fed and Treasury are fighting like mad to keep them there - hence the housing bubble caused by Greenspan. The whole FIAT money system is at risk as a result of printing too much money and inflating asset prices.