Macroeconomics - Low US interest rates

Introduction

This paper has discussed about the function of US interest rates. It has discussed the concept of Interest Rates. Further it discusses about the interest rates experienced and various reasons of interest Rates fluctuation. In the end, it discusses that To the extent that regulation is desirable, whether to maintain stability of the system, to resist international organized crime, or to assert democratic control, it will be necessary for government to develop new strategies and regimes.Interest-Rate ConceptsThe encounters of the majority people with interest rates occur in the context of events such as obtaining a mortgage for the purchase of a home, paying a credit-card bill, buying an automobile on credit, borrowing from a bank or the federal government for college expenses, or receiving interest on a bank account (Caroline P. Clotfelter, ed., 19). The Interest Rate is not concerned through the interest rates related with these common experiences. Rather, the interest rates presented are those that set the tone for the extensive array of normal interest rates. The interest rates in the Interest Rate play a main role in shaping ordinary interest rates. By obtaining these series for specific years or periods of years, the user is deriving information concerning the behavior of the entire constellation of ordinary interest rates during these years or time periods (Caroline P. Clotfelter, ed., 19).Two of the interest-rate concepts are short-term in nature, referring to borrowings that are pay back within a year. The short-term interest rate for regular funds originate from the normal course of business of financial institutions, for instance, the ordinary lending of funds by commercial banks for a short time period. The short-term interest rate for surplus funds entails the short-term (in fact, very short-term) lending or borrowing of surplus funds, that is, funds that are measured excess by the lending institution and are necessary for immediate temporary use by the borrowing entity.Another is the concept of the long-term interest rate. This notion is defer on long-term bonds, those that mature in at least 15 or 20 years, or perhaps have no predetermined maturity date (“perpetual bonds”). The bonds on which the interest rate was preferred to signify the long-term interest rate should have a low risk of default, that is, of the bond-issuer failing to make interest payments and principal repayment (Caroline P. Clotfelter, ed., 96).US Interest RatesCurrent changes in economic affluences have turned surpluses into deficits and transformed the debate over how U.S. deficits affect interest rates. Deficits might hoist interest rates for two reasons. First, the law of supply and demand argues that an increase in the federal government's demand for credit will push up the cost of credit. Second, an expanding national debt may spark fears that the Federal Reserve will print additional money to cover some of that debt and produce more inflation in the future. Though both arguments have some petition, their significance has been exaggerated (Richard Franklin Bensel, 215).The federal government is a big debtor. It at present ...