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23-04-2012, 11:36 PM
It wasn't foreign money that created the sub-prime in the US, neither was it a persistently low interest rate. The Fed did a study on that and concluded that low interest rate was not the key contributing factor to the subprime. It was instead the practice of easy to obtain mortgage loans, where no documents were required when a loan was applied for. Moreover, it was in the midst of a long enjoyable period of the Great Moderation and people became complacent and had a greater risk appetite.
http://www.youtube.com/watch?v=GLoqPm1nYRU <--- one of Bernanke's lectures which covered on the GFC
It is the control of money supply that leads to interest rate changes, not the other way round. Interest rates change from open market operations and not simply determining/saying how much interest rates should be.
http://www.youtube.com/watch?v=GLoqPm1nYRU <--- one of Bernanke's lectures which covered on the GFC
(23-04-2012, 11:12 PM)freedom Wrote: maybe Singapore can't influence FED's decision on USD interest rates, but at least MAS can control domestic SGD money supply through effective SGD interest rate control
It is the control of money supply that leads to interest rate changes, not the other way round. Interest rates change from open market operations and not simply determining/saying how much interest rates should be.