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Do all those ARM's blow up the economy?

Do house prices fall, lowering taxes, which fucks City/County/State budgets?

ELI5, what would a 1-2% raise in the interest rates do to US housing?

Do all those ARM's blow up the economy? Do house prices fall, lowering taxes, which fucks City/County/State budgets? ELI5, what would a 1-2% raise in the interest rates do to US housing?

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[–] • 0 pt

So, even in an optimistic scenario, consumer spending is drastically reduced.

Which is exactly what is needed. Less consumption, more money in the bank available to be loaned to businesses to generate real long-term wealth from it.

People would earn $80 a month in interest for every $10,000 in savings.

Fuuuuck that would be nice.

[–] • 1 pt (edited )

At the same time the value of your savings would be decreasing even more by inflation. Only when interest rates > inflation do you win by saving. The Fed will NEVER allow that to happen for long because they don't want you savings. They want to drive you to invest in commodities so they can collect all those investment fees on your money, not to mention inflate stock bubbles so they can cash in. If private people could beat inflation and earn a little just by saving money a lot of people wouldn't be in stocks and bonds.

[–] • 0 pt

Banks don't loan money like that. When they loan they create that "money" on their books, doesn't matter what they actually have it reserve . Reserve requirements effectively don't even matter as they can loan from fed at end of day to balance books when needed