OK, Superior Mortgage commerical comes on the air. And guess what those funny marketing geniuses come up with as a skit for a commercial?
A guy who calls the Federal Reserve asking for Alan Greenspan so he can ask Al to keep interest rates down so he can afford a mortgage.
So young apsiring junior deputy economists, what's economically wrong with this commercial?
I shall await your responses.
OK, update here. Per request I have decided to provide some sort of incentive. Thus the person to guess first why the Superior Mortgage commerical is rubbing me the wrong way will win...
$5 OF CAPTAIN CAPITALISM'S MONEY
AND
BE DEPUTIZED AS AN OFFICIAL "JUNIOR DEPUTY ECONOMIST!!!" (tin badge included!)
And who doesn't want that on their resume!?
12 comments:
Good tries so far (I've been outed?)
Susan, you're somewhat on track, it has to do with interest rates. But reverse your thinking in which drives what. Interest rates do not drive demand for houses, demand for houses drive interest rates. In other words, the same amount of people have always demanded a house regardless of interest rates. Something has driven interest rates low to the point that now many more people can afford houses (thereby increasing the price for houses).
I was actually half contemplating a prize, like sending the winner $5 so they can buy themselves a beer or something. But that is as far as my thinking takes me.
OK, fine, I'll throw in a shinny tin badge so the winner can be officially deputized a junior deputy economist.
Besides, with an MBA background you can go and ask some of the econ profs around for this one?
Since this isn't my bag of worms, I seriously don't know, but I'll take a guess just for the heck of it...
Competition for loans is keeping the interest rate down?
Demand for houses are always increasing, since there are less and less of them everyday per unit population. This increases the market rates of these products.
To be able to afford these, people start saving more and more -> this causes spending to decrease -> this causes US Fed to decrease rates.
Decreasing the Fed rate, gives the illusion of even greater affordability and pushes up demand for these constant number of houses -> prices increase again.
Keeping the rates low, will cause the person to part with more than his due pound of flesh in return for a mortgage.
Daniel is very close with his second post. I will also mention that it is not necessarily anything complex or complicated. Don't over think it.
Congratulations, young Daniel from scenic Europe has won it! Alan Greenspan controls only the Federal Funds Rate, merely the rate that the Federal Reserve loans money to other banks at.
This has absolutely nothing to do with the long term interest rates, which are determined by the amount of money people are willing to loan out for 30 years versus those that wish to borrow it for 30 years.
You Daniel you are the winner! E-mail me your address at captcapitalism@yahoo.com and I shall send you your $5 and tin badge. Or should you want me to convert it into Euros or Pounds or what???
Cpt. C.
Yeah, I do make it over to Agoraphilia every once in a while. How old is Glen? Is he like Jeff Sachs young? 2 or so?
27, I MEANT 27! The 7 did not type in. Did not want to seem I was insulting him! My apologies!
Yeah, that's pretty young (for a full doctorate). I mean you can push it and if you really wanted to get your doctorate by 25, 26 you could, but then you're looking at absolutely no beer being consumed or girls being kissed.
And of course it was an interesting class! It's economics!
You're absolutely right, China, in being so eager to help finance our federal government (and thus) current account deficits supplies the market will money they're will to loan out long term. Thus, the federal government doesn't have to go to US citizens to borrow money for 30 years, they have the Chinese government willing to loan them money. This increase in the supply of loanable dollars (long term, 20,30 years) lowers interest rates despite having high deficits that would normally result in what's called the "crowding out effect."
I really love your blog!
I've bookmarked it and told my blogger freak friends about it. It's intelligent, sometimes funny and always refreshingly honest. Keep Up The Good Work!
For any of your readers who want to contribute to the Red Cross to aid the many families who have been devastated by Katrina, there is a link to the Red Cross here.
Ray
To do your marketing for your business you can internet marketing services with the ebook at internet marketing services Go and check it out.
Post a Comment