Low Interest Rates are Not Good for the Future

If you are baffled with just how exactly interest rates relate with bonds and loans then you should not fret, MBAs are just as on the dark as you are in the matter.

The MBA are baffled right now with the issues in installment loan, and most especially the role of interest rates in the lives of the people and the economy. Interest rates have fallen so low during the recession that many individuals had failed to see how largely the country has fallen into debt.

It is a rule of thumb that lower interest rates mean cheaper loans. However, this requires knowledge from consumers about the operation of financial markets in order that they could comprehend the hazards of increasing national debt to the future of the economy of the country.

For example, when the government has more expenses compared to its revenues, it has to borrow money to balance out the loss. In order to do this, it would sell its bonds in to other financial intermediaries. When someone buys the bonds, the money earned would be now part of the U.S. Treasury and is used to pay for the debt of the government.

When economy is bullish like the recent situation in the US today, the savings would be higher compared to the investment opportunities in the financial market. The only positive news about the borrowing cost of the nation is that since the recession in 2008, there is a deficit of over $ 5 trillion and almost all of it will be soon be part of the Treasury bond of private individuals and banks in the United States and all around the world.

During the period of election, this problem will be left with economists, however it will remain as a hidden information from the public.

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