Pretty much title. I've seen this talked about a lot but I only very vaguely know what all this means, could someone elaborate on what happened, why it happened and what the consequences of it are?
Pretty much title. I've seen this talked about a lot but I only very vaguely know what all this means, could someone elaborate on what happened, why it happened and what the consequences of it are?
When you take a loan from a bank, the interest you have to pay is (some constant dependent on the bank and the loan and how risky they think you are to invest in) % + (variable reference rate like Libor) %. This variable part is calculated from how expensive it would be for a bank to borrow from all other banks, but is in often in practice controlled by some central bank. It can even be negative. The lower the reference rate is, the more profitable it is to loan money to invest.