http://www.mckinsey.com/insights/economic_studies/qe_and_ultra_low_interest_rates_distributional_effects_and_risks
A new report from the McKinsey Global Institute examines the distributional effects of these ultra-low rates. It finds that there have been significant effects on different sectors in the economy in terms of income interest and expense. From 2007 to 2012, governments in the eurozone, the United Kingdom, and the United States collectively benefited by $1.6 trillion both through reduced debt-service costs and increased profits remitted from central banks (exhibit). Nonfinancial corporations—large borrowers such as governments—benefited by $710 billion as the interest rates on debt fell. Although ultra-low interest rates boosted corporate profits in the United Kingdom and the United States by 5 percent in 2012, this has not translated into higher investment, possibly as a result of uncertainty about the strength of the economic recovery, as well as tighter lending standards. Meanwhile, households in these countries together lost $630 billion in net interest income, although the impact varies across groups. Younger households that are net borrowers have benefited, while older households with significant interest-bearing assets have lost income.
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Response by Riversider
over 12 years ago
Posts: 13573
Member since: Apr 2009
In the United States, compared with 2007, households’ net loss of interest income
in 2012 was about $55 billion, holding assets and liabilities at 2007 levels. From
2007 to 2012, they cumulatively experienced a loss of $360 billion in net interest
income, taking both interest rate and balance sheet changes into account.
In the United States, the loss of interest income in 2012 due to lower interest
rates among corporate-sponsored, defined-benefit plans was about $14 billion,
or only about 0.6 percent of total plan assets. A potentially more damaging effect
on pension plans has been the increase in the present value of liabilities, which
rose by 43 percent from 2007 to 2012.
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Response by 9d8b7988045e4953a882
over 12 years ago
Posts: 236
Member since: May 2013
To what extent are interest rates determined by Federal Reserve policy vs. demand for capital?
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Response by Guywithcat
over 12 years ago
Posts: 329
Member since: Apr 2011
McKinsey told AT&T to ditch the cellular market in 1990 for a billion dollar loss.
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Response by Riversider
over 12 years ago
Posts: 13573
Member since: Apr 2009
To what extent are interest rates determined by Federal Reserve policy vs. demand for capital?
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Fed buying Treasuries certainly lowered rates. And if there was doubt to this, the moment Bernnake indicated they might taper, rates started rising.
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Response by Guywithcat
over 12 years ago
Posts: 329
Member since: Apr 2011
Currently rates are largely being influenced by the government as a combination of the discount rate, the money supply and fed policy on buying government issued fixed income products. When you say "the demand for capital" you are simplifying the issue of capital. Capital is not always generated via debt, it is also generated with expenditures of cash, issuance of stock and other ways. With respect to streeteasy, most of the people here are brokers who don't understand how these all fit together. They are good at googling and then using copy/paste. Riversider's comment "if there was doubt to this" reveals how little he knows. The purchase of notes or bonds is directly correlated to bond prices which move in the opposite direction of rates. So there is no "doubt" and never was that the fed's action would affect rates and this is more often than not, precisely why they do this.
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Response by fieldschester
over 12 years ago
Posts: 3525
Member since: Jul 2013
Guywithcat, you seem really smart.
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Response by fieldschester
over 12 years ago
Posts: 3525
Member since: Jul 2013
>McKinsey told AT&T to ditch the cellular market in 1990 for a billion dollar loss.
Wow, 10 years after they told them to ditch the cellular market in 1980, they came back and said the same thing in 1990. What a hoot!
In the United States, compared with 2007, households’ net loss of interest income
in 2012 was about $55 billion, holding assets and liabilities at 2007 levels. From
2007 to 2012, they cumulatively experienced a loss of $360 billion in net interest
income, taking both interest rate and balance sheet changes into account.
In the United States, the loss of interest income in 2012 due to lower interest
rates among corporate-sponsored, defined-benefit plans was about $14 billion,
or only about 0.6 percent of total plan assets. A potentially more damaging effect
on pension plans has been the increase in the present value of liabilities, which
rose by 43 percent from 2007 to 2012.
To what extent are interest rates determined by Federal Reserve policy vs. demand for capital?
McKinsey told AT&T to ditch the cellular market in 1990 for a billion dollar loss.
To what extent are interest rates determined by Federal Reserve policy vs. demand for capital?
---------------
Fed buying Treasuries certainly lowered rates. And if there was doubt to this, the moment Bernnake indicated they might taper, rates started rising.
Currently rates are largely being influenced by the government as a combination of the discount rate, the money supply and fed policy on buying government issued fixed income products. When you say "the demand for capital" you are simplifying the issue of capital. Capital is not always generated via debt, it is also generated with expenditures of cash, issuance of stock and other ways. With respect to streeteasy, most of the people here are brokers who don't understand how these all fit together. They are good at googling and then using copy/paste. Riversider's comment "if there was doubt to this" reveals how little he knows. The purchase of notes or bonds is directly correlated to bond prices which move in the opposite direction of rates. So there is no "doubt" and never was that the fed's action would affect rates and this is more often than not, precisely why they do this.
Guywithcat, you seem really smart.
>McKinsey told AT&T to ditch the cellular market in 1990 for a billion dollar loss.
Wow, 10 years after they told them to ditch the cellular market in 1980, they came back and said the same thing in 1990. What a hoot!
you're an idiot.