Saturday, 30 March 2002

On low interest rates

Interest rates that are low by historic standards are doing strange things to a financial system that is highly deregulated. Note, in passing, the astonishing fact that most of the assets of US financial institutions are not subject to the risk-based capital regime and supervisory conditions that apply to US banks. This is because a high proportion of US financial activity now takes place outside of the banking system, in institutions ranging from non-banks such as GE Capital to giant hedge funds.

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