[Marxism] Recession in the works

["ameritech acoount" <stansmith44@xxxxxxxxxxxxx>]

  a.. The below may be true for some bonds, and I don't know enough about bonds 
to say these represent the norm. 
  b.. US government savings bonds, for instance, compound the interest, so in 
the example below, a 10% bond earns 
  c.. $1100 the first year, but the 10% the second year is on the $1100, not 
$1000, and so on. In addition, these bonds
  d.. are not locked into one interest rate, but it changes every 6 months with 
the FED interest rate. So, if in the second year
  e..  the interest rate is 15% it is 15% of $1100. 
  f.. I think it is CDs, not these bonds where interest rates are fixed.
  g.. 
  h..    On recession I heard from a National Retailer Association interview on 
the shopping season that so far this year is ok.
  i.. But Americans' debt is at its highest levels, while the household savings 
rate is at a low 1%. In addition, Americans have basically
  j.. spent any extra available money they had available from refinancing 
mortgages. He also said interest rates will go up because of 
  k.. the federal deficit, and the value of the dollar continues to fall. So he 
was not at all optimistic about shopping season 2005.
  l..     
  m..     On the other hand, I have read articles by economists about the 
coming economic disaster since about 1985.
  n.. 
  o.. Jon Flanders wrote:
  > 
  > 
  > 
  > Higher interest rates would benefit bondholders.

  Rates & Bond prices move in opposite directions. Hence all bondholders
  are seriously hurt by higher interest rates. Their bonds continue to pay
  the original interest, but they have to sell them at a lower price.

  A 10% 10 year $1000 bond pays $100 a year. If interest rates double to
  %20, the bond is now worth only $500. And it will still be (say) 8 years
  before it can be cashed in for the full $1000. So your paper worth is
  cut in half by a doubling of interest rates. (New bonds(government or
  corporate) make a very small part of the total bonds in circulation.
  "Investors" buy & sell bonds as they do shares.

  Carrol


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