Prepared by New Economic Paradigm Associates - Donald Byrne, Ph.D. - Edward Derbin, MA, MBA
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Have you ever thought understanding economics was too complicated, nonsensical, or just plain boring? It's our goal to explain economic theory as simply as possible - but no simpler. It is also our goal to present unbiased analysis, embracing logic while eschewing ideologic. We focus on real-life application, employing theory to help explain and aid in our analysis.
In our January 2006 Newsletter article, we warned against the impending housing collapse and the danger of rising oil prices...
Killing Fields: Weak Links in Otherwise Strong Economy (January 6, 2006) Predicting Financial Collapse January 2006 RISING MORTGAGE INTEREST RATES In addition to the rising energy costs and insecurity in the labor markets, households are now facing an additional burden of rising interest rates, affecting their mortgages. As short-term rates are driven up by the Federal Reserve actions in the Federal Funds rates, it influences other short-term interest rates to rise as well.
In the area of variable rate mortgages (ARMs), the Fed’s actions are gradually triggering the adjustment clauses in these mortgages. This increases the monthly payments, reducing further the disposable income available to purchase other goods and services and also reduces the cushion protecting homeowners from defaulting on mortgages.
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