Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.2 9/18/84; site ucla-cs.ARPA Path: utzoo!linus!philabs!cmcl2!seismo!harvard!talcott!panda!genrad!decvax!ittvax!dcdwest!sdcsvax!sdcrdcf!trwrb!trwrba!cepu!ucla-cs!brett From: brett@ucla-cs.UUCP Newsgroups: net.invest,net.misc Subject: Re: Re: "World Banking Crisis" -- what is it? Message-ID: <6022@ucla-cs.ARPA> Date: Sat, 15-Jun-85 00:25:34 EDT Article-I.D.: ucla-cs.6022 Posted: Sat Jun 15 00:25:34 1985 Date-Received: Sun, 23-Jun-85 15:19:53 EDT References: <11154@brl-tgr.ARPA> <2287@sun.uucp> <161@idsvax.UUCP> Distribution: net Organization: UCLA Computer Science Department Lines: 60 Xref: linus net.invest:669 net.misc:6663 > > B of A would not be the only bank affected. Sure the money > is federally insured, but where is the Federal government going > to get the money? Borrow it from B of A? I do not pretend > to understand how the government can insure against hundreds > of billions of dollars of defaults (a worst case, where several > countries default). If the explaination is too complicated, > I doubt many people will buy it. From my understanding of the matter, the Government's insurance means the bank must spread their investments around in certain fixed ways. Insurance comes with certain strings attached, its not just free. Presumably this spread decreases the domino effect. Insurance is just that, insurance. For the most part if insurance companies had to suddenly pay off on all policies they would be bankrupt. Acturaries weighs the costs and risks for insurance companies. > Note that the policies of the current administration > are modern day brinksmanship. By keeping the interest rates > high in the US, inflation has been subdued. Not correct. Banks are being cautious about lowering their rates too low. When the prime is lowered too low (and if at some later time it shoots up) the banks could get stuck with too many low interest non-profitable loans. Thus, the prime will come down slowly, as it has. > It is pricy for the US, because it makes US goods and services more > Expensive than foreign goods and services and therefore > discourage foreign countries from buying US goods and > services and encourage US citizens to buy foreign goods > and services. It is pricy for countries that owe the US > money because the interest rates have increased on their > loans. Kinda of sneaky when you think about it. Loan > someone money and then increase the intrest. > I dont really understand this. Anyone on the net want to explain this to me? > On the other hand, if interest rates came down dramatically, > most economic models predict that inflation would rise. How dramatically? I've heard of interest rates being affected by inflation, not the reverse. Which economic model? -- Brett Fleisch University of California Los Angeles 3804 Boelter Hall Los Angeles, CA 90024 Phone: (213) 825-2756, (213) 474-5317 brett@ucla-cs.ARPA or ...!{cepu, ihnp4, trwspp, ucbvax}!ucla-cs!brett -------------------------------------------------------------------------