Word: loaned
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Dates: during 1970-1979
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Economists these days are applying a kind of Sherlock Holmes logic to the strange case of interest rates. Like the watchdog who did not bark (thus signifying to Holmes that the crime he was investigating must have been an inside job, perpetrated by someone the dog knew), loan charges have been doing the opposite of what might be expected. They have been lying low throughout a period when all past experience indicates they should have been rising. Like Holmes, economists think that this curious behavior must provide an important clue-in this case to what is really happening...
...Board of Economists: "This is a mystery to all of us." Economists do have some explanations, however. The most important: not only current price rises but expectations of future ones have diminished to the point where lenders no longer feel they have to tack a high "inflation premium" onto loan charges -and businessmen would not pay such a premium anyway...
Another factor keeping interest rates low is that the Federal Reserve Board has been creating enough new money to accommodate loan demand. That has turned out to be less money than almost anyone a year ago would have thought necessary: the nation's money supply in the twelve months through April grew only 6.1%. But the judgment of Federal Reserve Chairman Arthur Burns as to how much is enough proved surprisingly accurate. One reason is a change in what Burns calls "financial technology": corporations now may open interest-bearing savings accounts and quickly shift the funds, when needed, into...
...critics now think that interest rates are too low. Otto Eckstein, a member of TIME's Board of Economists, fears that if rates do not rise gently this year, they will go up so abruptly in 1977, when loan demand should finally revive, as to jolt the economy. Burns does now seem to be trying to nudge interest rates up a bit; among other things, he intends to dole out money more slowly. His new target is money-supply growth of 4½% to 7% a year, down from the 5% to 7½% he had been aiming...
Stretched-Out Payments. Fraser now is trying to persuade some 30 banks, real estate investment trusts and savings and loan associations to accept a stretchout of payments on Sea Pines' debt (now down to $110 million from a high in 1974 of $280 million). He plans a three-to four-year halt in new development projects, while striving to increase profits from operating resorts at Hilton Head and Amelia Island, Fla. The strategy seems to be paying off. In the first two months of the current fiscal year, which started March 1, revenues from Sea Pines Plantation were...