A Number Problem (Easy) - Coin Community Forum

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Author	Replies: 6 / Views: 1,246
biggfredd Rest in Peace United States 9104 Posts	Posted 09/09/2011 06:00 am To figure out why we've gotten backed into a corner, we have to look at how changes affect the economy. When interest rates were around 8%, a change of 0.25% was a difference of 3.125%. This allowed some fine tuning of the economy. When they got down to 4%, that same 0.25% became a 6.25% move. Now, when they've got the rate down to .5%, that 0.25% is a 50% move. "But it's only 0.25%!" OK, what happens when you raise 8% by 50 basis points to 8.5%? Every billion dollars borrowed now requires $85 million instead of $80 million interest. Not a huge difference overall. Today, raising the .5% rate by 50 basis points makes it 1%. Every billion dollars borrowed now requires $10 million instead of $5 million interest. That little bump just doubled the interest that will have to be paid. They now have no choice but to fine tune with a baseball bat. Report this Post to the Staff

nod2003 Pillar of the Community United States 3294 Posts	Posted 09/09/2011 08:53 am Or they could just change from 0.5% to 0.48%. Report this Post to the Staff
mmerlinn Valued Member United States 302 Posts	Posted 09/09/2011 11:32 pm Sooner or later the days of 15% and higher interest will return. If you lived through that kind of interest, you know how much of a burden it was. The only other government "solution" is more worthless money which effectively transfers the high interest into high inflation. Unfortunately, that, too, will push interest rates through the roof. Like, who can afford to lend money at a lower rate than the underlying inflation? And who will want to save money? On a personal level, the only solution is hard assets like gold, silver, food, land, etc. The wise will only keep enough cash and cash equivalents around to handle immediate needs. All long-term cash should be in hard assets and free from encumbrances. Report this Post to the Staff
biggfredd Rest in Peace United States 9104 Posts	Posted 09/10/2011 03:21 am The trubl with 15% interest is it's accompanied by about 13% inflation. The way interest should be calculated is inflation + risk = interest. The inflation part assures the money you get paid back buys as much as the money you lent, the risk part protects the lender against the borrower failing to repay. Notice that there is no profit factor built in. The idea is that the lender parks his money elsewhere, and in the end gets back what he started with. Report this Post to the Staff
chris beatie Valued Member 344 Posts	Posted 09/10/2011 08:13 am this is why you should buy houses cash (or in the future with PMs :D), buy cars the same way buy everything with money or PMs that you actually own. Dont barrow money today having to pay back significantly more later (unless you'll make much more off it by doing so) When I was 18 someone got a hold of my 1st credit card, maxed it out to 5k and being a college kid I obviously could not pay it. So my credit became screwed. Ten years later I am ecstatic that happened, rather then being in debt like many are I owe nothing to nobody and have actual wealth I can hold or trade. loans are a trap to keep rich people rich and everyone else down in the dumps. Report this Post to the Staff
biggfredd Rest in Peace United States 9104 Posts	Posted 09/10/2011 10:59 am You should have pursued the theft of your cc. Report this Post to the Staff
Ed_B Pillar of the Community United States 4008 Posts	Posted 09/10/2011 6:57 pm Quote: loans are a trap to keep rich people rich and everyone else down in the dumps. They can be. There are stupid loans and smart loans, however. Those who are dumb enough to abuse their credit probably deserve what they get. Those who use credit sparingly and wisely, however, find that it can be a very useful tool. Those who lend money would like to see it all returned at some point and with the promised amount of interest paid. When money is put at risk of loss, there should be some form of payment for that service, else why would anyone ever do it? Report this Post to the Staff
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