I’ll ask it in another way: 1) Low rates caused demand for money to increase, and 2) Increased demand for money caused rates to increase. Is it possible to say these two statements AT THE SAME TIME? Answer is yes.
Dreary Wrote: ------------------------------------------------------- > I’ll ask it in another way: > > 1) Low rates caused demand for money to increase, > and > 2) Increased demand for money caused rates to > increase. > > Is it possible to say these two statements AT THE > SAME TIME? Answer is yes. Yes because it is grammatically correct. 
I meant they have occured at the same time, strangedays.
Yes Dreary, as people get their heads out of their rears in the US, they will see that inflation is all around us and rates will start to increase. But for right now, the Fed keeps them low b/c we are in a recession, another thing no one seems to believe. Okay, now I am sure I will receive all kinds of flack for my opinion on recession/inflation
Dreary Wrote: ------------------------------------------------------- > I meant they have occured at the same time, > strangedays. I know Dreary, I was just joking.
Last chance to explain how these two events could possibly occur at the same time: 1) Low rates caused demand for money to increase, and 2) Increased demand for money caused rates to increase. This is really an important concept. No kidding.
ok, here goes the answer: 1) Low rates caused demand for money to increase (i.e., quantity demanded), and 2) Increased demand for money (i.e., right and up shift in demand curve) caused rates to increase. These two events can happen at the same time…The single most common mistake made by newbies, IMHO.
Dreary Wrote: ------------------------------------------------------- > ok, here goes the answer: > > 1) Low rates caused demand for money to increase > (i.e., quantity demanded), and > 2) Increased demand for money (i.e., right and up > shift in demand curve) caused rates to increase. > > These two events can happen at the same > time…The single most common mistake made by > newbies, IMHO. then I am def a NEWBY
The Fed makes no mention of the word “recession” in its minutes. They simply say that the outlook for growth remains weak. Same difference, right? Technically, no. But apparently everybody and their brother is an economist now and defines recession as $4.00 gas and getting laid off. Suddenly I’m a PhD Senior Economist if I just blame it on Bush and his greedy oil executive buddies. But I’ll agree with you Amberpower, inflation is an untamed beast at this point. The next time you hear somebody cheer about the “fed lowering rates” so they are calling their loan officer to refinance, while in the same breath bitch about the “Bush economy” and how much they just paid to fill up their tank, please smack them in the mouth. These rate cuts, while necessary, have raped the dollar which has contributed to the higher commodity prices. Add that to a drought of business and personal spending and you have a problem that a “windfall profit tax” will certainly not fix.
Doesn’t it go something like this. When rates are below equilibrium, the opportunity cost of holding money is too low so households sell securities (bid them down) therefore raising the interest rate back to equilibrium. In the opposite scenario people would bid up treasuries to reduce their money holdings, which would lower the interest rate.
wildcat, >defines recession as $4.00 gas and getting laid off but that can also happen with stagflation…high prices and weak GDP. nirjrania, This is a good way of thinking about demand for money. Investors sell short-term bonds/bills when rates are low, and buy them when rates are high.
Economists generally define an economic slowdown as your neighbor being laid off but a full blown recession is when you yourself are laid off. Again though, this is generally speaking.