Exact(8)
Experience suggests it can drive asset prices well above the levels that cautious investors are willing to stomach.
However, this argument was circular; easy credit will drive asset prices higher and make borrowers more willing to lend.
"It is highly likely that a new surge in bankruptcies consequent on any liquidation program would drive asset prices lower," he wrote in a report.
Another higher-risk area that investors shouldn't overlook is the financial sector, Mr. Retzler said, especially because it is directly affected by the Fed's efforts to keep interest rates low and drive asset prices higher.
But Hedge Fund Research notes a reduction in money from funds of hedge funds, which normally drive asset growth.Morgan Stanley's researchers believe that last quarter may prove to have been the peak.
But low rates can help to drive asset prices to unsustainable levels, as in the dot-com bubble that popped in 2000 and, of course, the recent housing bubble.
Similar(52)
Low rates drove asset prices higher.
The use of borrowed money to buy assets drives asset prices higher, and encourages banks to lend more money against those assets.Furthermore, this system rewards those who have assets in the first place.
4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse.
They can often be subject to herd behaviour that drives asset prices out of line with fundamentals.Follow the moneySeveral empirical studies have confirmed that there is a strong link between financial development and economic growth.
The inflationary credit bubble spurred in southern European countries by the persistence of lower interest rates undermined their competitiveness and drove asset and property prices to unsustainably high levels.
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