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American Capital Agency Corp. Message Board

  • ray8435893 ray8435893 Mar 18, 2011 6:26 PM Flag

    MF article re interest rates

    The Fool's article suggesting that an increase in interest rates has been pushed out by Japan and the stock market correction is something I agree with except that it might have happened even without those two precipitating events. I think we are reaching the point that we have to try to keep interest rates low because the interest payments on our debt would kill us.

    If rates went up 3 percent - which might be more historically typical - that's $1/2 trillion of additional interest per year, and that's just at the Federal level. An increase like that could sink some states with their money problems, and throw us into a fatal depression.

    If we get a little inflation as a result of printing money to keep the rates down, I think the Fed would view that as good. We can't risk deflation, and a little inflation will help us pay on the debt.

    I think that world has changed in this way just recently, and not everyone is even aware of it. The fact that Japan will probably have to sell some Federal debt, and other countries might do the same pretty soon - does not help, and forces the Fed to keep easing.

    Therefore, AGNC may be a more long-term hold than it was once thought to be. If people start to agree with this analysis, we could get a different behavior with regard to the somewhat predictable price fluctuations of AGNC stock. We could also see the pps going to $40 or $50 as well ... it's already at a 52-week high.

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