Why The Banks Issue Credit Essay

PAGES
2
WORDS
709
Cite
Related Topics:

Predicting the Future Interest Rate It is likely not possible to forecast the interest rate accurately, as the Federal Reserve has been keeping it new zero for several years now and more recently has been promising rate hikes yet holding press conferences in which the tone is far more dovish than hawkish. Thus, from expectations of four rate hikes a year totaling a 100 basis point rise, expectations are reduced to one, perhaps two, rate hikes, as the "data-dependent" Fed sees bad jobs reports, a stagnating global economy, and other factors putting pressure on the decision to normalize rates (Durden, 2016).

Once rates do hike, however, there is likely to be a sharp correction in the stock market as investors seek less risky investments (even a mere 25 basis point raise is enough to cause investors to flee the market for safer havens, as the previous rate hike showed) (Phoenix Capital, 2016). The rebounding of the market (considering volume) has the appearance more of a short squeeze than the return of confidence, and with the Fed bouncing between hawkishness and dovishness, one cannot know which way rates will go in the foreseeable future. They could even possibly go negative as they have in Europe and Japan...

...

Or another factor can be the state of the economy, which takes money out of the hands of the middle class individual with a bank account; his income dwindles as a result of recession-like symptoms on a global scale; he does not have as much to save, and deposits dry up.
Q3: Subject:The Role of Liquidity

Without liquidity, there is no market. The problem is especially felt when one owns a significant stake of a certain portion of an asset and wants to sell -- but there are no buyers. This is a liquidity problem. In order to sell, the market will undercut him (because there is no demand) and he will likely lose on his investment. When liquidity dries up, it means there are few buyers and sellers: investors are staying away. Liquidity crunches can create massive volatility in the market that end in massive moves one direction or another (Martin, 2015).

Q4: Subject: Credit…

Sources Used in Documents:

References

Durden, T. (2015). This is what happens after three years of negative interest rates.

ZeroHedge. Retrieved from http://www.zerohedge.com/news/2015-10-22/what-happens-after-three-years-negative-interest-rates

Durden, T. (2016). "Data Dependent" Fed Chickens Out Again: Blames "Global" Risks

For Unchanged Rates, Cuts Rate Hike Forecast. ZeroHedge. Retrieved from http://www.zerohedge.com/news/2016-03-16/data-dependent-fed-chickens-out-again-blames-global-uncertainty-us-rate-hold
Retrieved from http://www.telegraph.co.uk/finance/markets/11487546/Liquidity-crisis-could-spark-the-next-financial-crash.html
Retrieved from http://www.zerohedge.com/news/2016-04-15/real-reason-fed-will-not-raise-rates-again


Cite this Document:

"Why The Banks Issue Credit" (2016, June 12) Retrieved April 19, 2024, from
https://www.paperdue.com/essay/why-the-banks-issue-credit-2159565

"Why The Banks Issue Credit" 12 June 2016. Web.19 April. 2024. <
https://www.paperdue.com/essay/why-the-banks-issue-credit-2159565>

"Why The Banks Issue Credit", 12 June 2016, Accessed.19 April. 2024,
https://www.paperdue.com/essay/why-the-banks-issue-credit-2159565

Related Documents

Bank of America is one of the largest financial services company in the U.S. It is the largest bank by assets, largest commercial bank by deposits and is the second largest by market capitalization in the United States. In the Porter's Five Forces Model, Bank of America's main competitors include JPMorgan Chase, and Wells Fargo. Bank of America does have a lot of key factors working in its favor. The

Credit Card Marketing on College Campus College students are the perfect target for credit card companies looking to hook people into the world of revolving credit. They are the perfect candidate for such an ordeal since college students are at an age where they are transitioning from being teenagers living and depending on their parents, to becoming young adults who are going to live on their own, and most likely on

Starting a New Business There are several issues that one need to consider in starting a new business. These issues relate to marketing research, competitive analysis, and financial matters. Below, we define some of these issues on detail. To finish my projects I contacted over ten professors at our university and other institutions, and have obtained valuable advice from them. I was fortunate enough to receive the valuable advise from two

Credit Risk Management Banks are an important part of the economy of any nation. Traditionally, the banks operate as financial intermediaries serving to satisfy the demand of people in need of various forms of financing. Through this, banks enable people to purchase home and businesses to expand. These financial institutions therefore facilitate investment and spending that are responsible for fueling the growth of the economy. In spite of their vital role

In fifty years, the heavy spending that credit cards facilitate will be viewed negatively, but credit cards themselves will still exist and most likely without stigma. The use of credit cards will be even more widespread, as fewer purchases will be done on site. Credit cards may be scorned by individuals who have acquired too much debt, but on the whole their benefits to society will not be overlooked. The dramatic

Bank Manager A business report on the forecasted analysis of EcoGenics, Inc. Company with two products EcoGenics, Inc. Authored by: A business report on the forecasted analysis of EcoGenics, Inc. Company with two products Company overview Product cost estimate Variable costs Fixed Costs Selling Price estimate Cost plus price Market Price Break even analysis per product Company Break-even five year financial projection operational budgets five year income statements investment appraisal net present value environmental impact reflective About Our Company EcoGenics is a United States of America-based company that specializes in the manufacture and