Federal Prime what now?

[asterroc]

There's this Federal Prime Interest Rate sorta thing. And the Feds change it. And somehow it makes all other interest rates change and whether people can get mortgages and stuff.

Explain.

Comments

[galbinus-caeli.livejournal.com]

Banks loan each other money at the prime interest rate. They then loan that money to people and businesses at a some fixed amount above that. When the fed lowers the rate the banks can borrow more and loan more putting more money into circulation. This means businesses and people can buy more stuff from each other. Raising the rate causes banks to hold onto their money more reducing the amounts they loan and reducing the amount of money in circulation so people and businesses buy less.

It is all a shell game.

This clip will explain.

[dirkcjelli.livejournal.com]

http://onegoodmove.org/1gm/1gmarchive/2007/09/alan_greenspan.html