Wednesday, December 23, 2015

Vahe Hayrapetian: What is ZIRP?

What is ZIRP & Why Does it Matter?

The Zero Interest Rate Policy (ZIRP) has been established by the United States Federal Reserve (Fed) to provide cheap capital to increase productivity and economic activity. This has been the Fed's policy since 2008.

Capital is Primary Productivity Input

As a primary input for productivity, capital can determine how successful businesses and consumers can be. Cheap money allows people to take out more loans to purchase things that they want to enjoy today with promises of repaying the loans tomorrow.

UK Calls 2008 the "Credit Crunch"

In 2008, global financial markets saw a serious risk of shutting down due to the collapse of Bear Stearns and Lehman Brothers. These powerful financial firms had gone bankrupt and many banks were afraid of their exposure therefrom. The United Kingdom called 2008, the "Credit Crunch."

Ample Capital Increases Home Sales

One of the primary engines of US housing market appreciation has been cheap capital. Lower interest rates and increased loan options, such as the Adjustable Rate Mortgage (ARM), have enabled individuals to purchase and remodel their homes.

If you are interested in buying or selling a home, then contact the experienced California Realtor Vahe Hayrapetian.

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