tag:blogger.com,1999:blog-6089228851855763774.post5478963886295473061..comments2024-03-29T07:10:06.022+08:00Comments on Gold Chat: US manipulating the gold price upBron Sucheckihttp://www.blogger.com/profile/00530576934994289879noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-6089228851855763774.post-26328566990394488952011-10-15T19:58:13.207+08:002011-10-15T19:58:13.207+08:00Or you deal with the issue the way we do in Austra...Or you deal with the issue the way we do in Australia, and issue variable rate mortgages.intuitivereasonhttp://intuitivereason.wordpress.comnoreply@blogger.comtag:blogger.com,1999:blog-6089228851855763774.post-25105964694970664002011-10-15T07:32:45.429+08:002011-10-15T07:32:45.429+08:00Bob said: "This would mean much less loans ma...Bob said: "This would mean much less loans made and much less home ownership." Actually, eventually it would kill the housing price bubble resulting in houses that people could afford without being in hock to the banks for most of their lives.Gordonnoreply@blogger.comtag:blogger.com,1999:blog-6089228851855763774.post-2929841251283964122011-10-14T19:54:52.061+08:002011-10-14T19:54:52.061+08:00The asset-liability duration mismatch is also the ...The asset-liability duration mismatch is also the result of the normal shape of the yield curve, i.e., ST rates are usually lower than LT rates. If banks financed their LT assets (the 30-yr mortgage on your house) with LT liabilities (30-year bonds), the rate they would charge you would be much higher, assuming they could get funding on the long end of the curve. This would mean much less loans made and much less home ownership - a goal of many governments. Since your cost of servicing would be higher you would spend less on Big Macs and GDP growth would suffer.<br /><br />Additionally, the banks would face serious prepayment risk, i.e. if interest rates fell and everyone refinanced into lower-rate mortgages, the bank would face a negative interest margin if it could not refinance its liabilities. This could wipe out the bank. <br /><br />Derivatives may have heightened the risk but banks have been taking on interest rate risk in exchange for a positive NIM for centuries.<br /><br />It may be true that the government <br />supports this because it is beholden to the bankers, but it is also true that it is conducive to more lending at lower cost, and thus higher economic activity.<br /><br />As for the Iranians, maybe they want a guest post on The Blog That Shall Not Be Named (tm)?Bobnoreply@blogger.comtag:blogger.com,1999:blog-6089228851855763774.post-1819681876442304082011-10-14T11:22:39.536+08:002011-10-14T11:22:39.536+08:00"His argument is that borrowing short and len..."His argument is that borrowing short and lending long is at the heart of our banking problems and cause of the business cycle."<br /><br />I think it has to do with persistently falling interest rates. Here's an article by Keith Weiner at GSI that I thought was rather good;<br /><br />http://www.goldstandardinstitute.net/2011/08/falling-interest-rates-and-duration-mismatch/Justinnoreply@blogger.com