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That end is called raising the interest rate. When the rate hits some magic phase transition number where enough people believe you can invest in safe liquid ac
by pishpash 9y ago
That end is called raising the interest rate. When the rate hits some magic phase transition number where enough people believe you can invest in safe liquid accounts for more than the return on risky assets then the whole thing collapses.
But then it'll get propped up again afterwards and everybody believes that now.
- eighthnate 9y agoNot sure why you are being downvoted. That's essentially how things work. That's what FED and interest rates exist to do. Create and pop bubbles. As the FED raises interest rates, money will start trickling out of "riskier" assets. The quicker the FED raises interest rates, the more quickly money will leave. Then we get a recession and when the FED feels they've sopped up enough money from the economy, then they will lower interest rates to get more money into the system, get more economic activity and re-inflate asset prices.
- hodder 9y agoIt is a spectrum not an absolute magic rate. As rates rise, different individual investments will be foregone.