I'm no economist. Question: What happens if we freeze interest rates as HRC advocates?

[MercutioATC]

I'm thinking financial chaos in terms of the stock and bond markets as they rely on the ablity to fluctuate.

...but I really don't have the background for this.

What would happen (and why)?

[N4457S]

1. We Can't...

...but Hillary is appealing to the unwashed when she says we can.

It'll never happen. It can't and she knows it.

[Skittles]

10. the "unwashed"?

WTF is that supposed to mean?

[aquart]

2. Which interest rates? Prime?

At this point, while we're in the deadly stagflation, the economy can no longer be helped by cuts or increases to the prime rate. We rely on that as the be all and end all
but it ain't worth spit as a fix now.

[MercutioATC]

3. My question regards what happens to the markets if we legislatively freeze consumer credit rates

(I'm assuming that the base rates wouldn't be dictated but consumer credit rates (credit cards, mortgages, etc) would be frozen).

Yes, I realize that they're all indexed to various other rates, but Clinton doesn't seem to be talking about anything other than freezing actual consumer credit rates.

[aquart]

4. IS that what she's talking about?

You'll have to tell me as I haven't seen it. But there are complaints about rate hikes for no purpose other than to recoup mortgage losses. Are you in favor of such hikes for the consumer?

[MercutioATC]

7. I don't want to stray from the OP question...

...even though it seems to be getting almost no response.


My question isn't political or ethical, it's practical.

What would happen to stock and bond markets if U.S. consumer credit rates were legislatively frozen at their present levels for 5 or 6 years as Clinton proposes?

[aquart]

8. Good question.

Depends on the relationship of those rates to stocks and bonds and, since I haven't a clue what that relationship is, I shot off an email to an actual economist and, hopefully, he'll get back to me.

Although it's all likely moot. Since Obama is winning right and left, literally, it would probably be of more benefit to your future to find out about HIS policies.

[MR. ELECTABLE]

5. Young people get screwed again

If she freezes the interest rates on existing mortgages, that will do nothing to help anybody who bought when the prices were higher-- they'll still be underwater on their loans and they will still be screwed if they have to sell their house (moving for a new job, divorce, job loss, whatever). Because mortgage companies will not be able to recoup their losses from these homes, they will have to raise the interest rates on loans for people who are looking to buy a home.

Basically, all the young people who are ready to buy a home but have been priced out of the market due to this housing bubble will get shitty loans to cover for all the idiot boomers buying investment properties. Of course since Clinton's only solid constituency is the 60+ crowd, this isn't a problem.

[Donnachaidh]

9. the housing market has been over-inflated for YEARS

And it's NOT a generational divide, despite the fact that you seem to want to make it one.

A FREEZE on the interest rates would actually help anyone who wants to buy a home now. Although that would be a dumb move, as the housing prices are on a steep adjustment down. So all these *young people* who are blaming Hillary for the problems should sit on their downpayments, and wait until the slide levels off. That's what a SMART consumer does, in any case.

:eyes:

[Dark]

6. An excellent article on the subject:

http://www.huppi.com/kangaroo/Keynesianism.htm

On edit:

Basically, the interest rate needs to go higher. You lower the interest rate when inflation is low (aka strong dollar) and raise it when it's high. The point is, when inflation is high, you want to reduce the number of dollars in the economy, thus making each dollar more valuable and reducing inflation.

Also, in a recession, the gov't needs to spend money to counteract the loss of jobs and make people confident ins spending money again.

In good times, when inflation is low, you cut interest rates and start printing more money. That then encourages spending. Though inflation does go up some, the added spending increases the economy.


Unfortunately, under Bush, we have a huge debt and huge inflation, basically meaning that neither of the above methods will work very easily to reduce the spending.

In short: Hard times are ahead.

[mmonk]

11. Cheap dollars will result (as if they aren't already on the ropes).

There aren't any real good solutions to get us out of this except better paying jobs.

[ThomWV]

12. If you freeze rates credit becomes unobtainable pretty quick.