FMG 0.00% $20.35 fortescue ltd

its a lot simpler than all that stuff about ClubMedinterest...

  1. 111 Posts.
    its a lot simpler than all that stuff about ClubMed

    interest rates are set according to your risk "profile" ... "sovereign"/govt is considered almost zero risk as govts can tax the crap out of their citizens to pay the bill ...
    we all get rates higher than governments because we are "higher" risk because we have fewer sources of income and are vulnerable to be laid off etc
    and if your credit rating is zippo you get to deal with bloodsuckers like GE Finance who will lend you money at huge interest rates ... to cover their expected higher levels of defaults

    now we're talking about a private bank Dexia going bust because it lent most of its money to the Greek govt ...
    think about it a private bank going bust for lending money to a government. Basically they have lent in what was considered the most conservative way possible ... to the lowest risk customers ... a government

    the result of govt default is higher interest rates for governments in the future and everybody else as we are still considered more risky than a govt and every % added to govt lending will almost certainly be added to your next loan

    nett result ... borrowing costs get too high - economic activity dies and you have a mega recession

 
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