Bizarre Shadowy Paper-Based Payment System Being Rolled Out Worldwide

Re:Bizarre Shadowy Paper-Based Payment System Being Rolled O... by sokoloff on Wednesday February 19, 2014 @04:46AM (#7262789)

I genuinely can't tell if you understand what I said or not. (It isn't my finest work, but if you read my reply in the context of the post to which I was replying, it will make more sense.)

I'm well aware that there's a risk-spread over the base rate for mortgages. My point was that the GP said he worked in a bank pricing credit and never had to figure anything to do with inflation; he only had to deal with a cost of funds figure and therefore banks don't price inflation into credit products.

My point was that cost of funds figure WAS the inflation figure.

Now, if you're arguing that there isn't 100.000% correlation between the various cost of funds rates and the various measures of inflation, I'll agree, but posit that the correlation is high, just not perfect.

[ Parent | on HN ]

Re:Bizarre Shadowy Paper-Based Payment System Being Rolled O... by aidenn0 on Wednesday February 19, 2014 @11:57AM (#7264547)

I think the correlation is very weak. We've had very high cost of funds in times of low-inflation. All the bankers care about is if they can make more money lending it out as a mortgage than they can putting it somewhere else (after factoring in risk). If there is no low-risk inflation hedge, then they could very well lend out money at rates below inflation (after factoring in their risks), since that could still be a higher return than any available lower-risk investment.

[ Parent | on HN ]