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- Federal Interest Rates vs Consumer Interest Rates
Federal Interest Rates vs Consumer Interest Rates
Robert Monk, "robertmonk"
Real Estate Agent
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Question: Why is it that when the 'Fed' lowers interest rates and none of this discount ever reaches the consumer?
When the Fed lowers an interest rate, it is doing what, exactly? Is the Fed just lowering the amount of interest it charges to its own clients for the money it creates in the form of bonds?
If that's anywhere near correct, then when the Fed issues bonds, it further dilutes the value of the dollar, meaning the value of America.
So, if consumers who take loans from banks to buy beachfront property in Santa Rosa Beach, Florida, or a home for sale in Driftwood Estates, don't get the discount from the Fed, who does?
Obvious answer, those who borrow directly from the Fed by purchasing bonds to serve as collateral for funds they loan to consumers.
Those borrowers are what... banks, mortgage companies, and other financial institutions?
So, can it be said that every time the Fed lowers their 'interest rate', the financial institutions get a raise?
Why can't we, consumers, borrow directly from the Fed? Cut out the middle man, so to say...
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