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Post by unlawflcombatnt on Jun 22, 2007 15:03:55 GMT -6
Ain’t No Yield High Enough, by Peter Schiff, is a great 1-page assessment of the effect that rising bond yields will have on the economy. With foreign central banks shying away from U.S. Treasuries, the total demand for purchase of bonds (and debt) will decline. This increases the amount of interest that must be paid on bonds to attract buyers. As a result, this will increase the cost of borrowing money, both for Corporate America and consumers. The increased interest paid on bonds (and loans) will cut into Corporate profits and reduce stock buybacks and leveraged buyouts. Worse still, the increased interest on borrowed money will cut into the amount of money consumers have available to spend on consumer goods. The result will be a reduction in consumer spending and a reduction in stock prices, the latter being due to inability to further inflate stock prices through purchasing with borrowed money. Needless to say, the Housing Bubble will continue to deflate, as less money will be available to purchase homes and perpetuate price appreciation. In addition, more homes will be on the market due to decreased sales, increased foreclosures, and continued New Home construction.
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Post by rjfliberal07 on Jun 22, 2007 22:32:37 GMT -6
It is kind of like a slow motion car crash were the results of the crash are not known for quite awhile
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