I think you hit the nail on the head there, at least a nail that is a big part of the financial world at the moment.
You only have to look at the biggest economies in the Western World and see where their interest rates are.
U.S. ZIRP, EU Negative. Australia 2.5% the lowest in history. Taking Australia's case, the banks have huge investments in derivatives, so much some of them refuse to publish the figures any more. The RBA has come out in the last couple of days and wants legislation passed to increase first home buyers loan requirements. Normally they make up about 20% of the market but at the moment they are down to about 10% and if the RBA does what it wants to do they will be down to about 5% The RBA knows there is a significant problem of over leveraging of this group in the Australian property market. The RBA cannot raise interest rates otherwise the banks will take a big hit as 80% of all Australian banking investment is in the Australian property market.
The RBA is attempting to use other Macro Prudential rules and raising the requirements for property loans rather than use interest rates. The RBA has been avoiding raising rates as much as they can.
The thrust of my comments is the RBA cant raise rates or the banks will get smacked hard and with Banking Loss Bonds coming in as Bail-In one has to wonder at the timing of all this. I agree with Daytr about interest rates. The economies are screwed either way without substantial growth!!
