IDEAS home Printed from https://ideas.repec.org/h/pal/palchp/978-0-230-27610-9_11.html
   My bibliography  Save this book chapter

The Long-Term Risks to US Financial Markets

In: The Post ‘Great Recession’ US Economy

Author

Listed:
  • Philip Arestis
  • Elias Karakitsos

Abstract

Financial markets link the imbalances of the various sectors of the economy to their spending decisions, which is particularly important in asset-led business cycles. The success or failure of monetary policy to steer the economy out of the asset and debt deflation spiral relies on its ability to affect developments in bond yields, equities and currencies. Chapter 10 dealt with the dollar and this chapter deals with bonds and equities. Bond yields affect the entire spectrum of interest rates from mortgage rates to corporate bond yields that determine housing and fixed investment. Bond yields also affect bank debentures that determine the cost of bank borrowing from capital markets and therefore the availability of bank lending. The bond market shapes the ability of the personal sector to service its debt and the appetite of households to accumulate more debt. This, in combination with the housing market, impacts upon personal sector net wealth and, therefore, on consumption. As we shall see later in this chapter, bond yields also influence equities through the equity risk premium and the pricing of all financial instruments and synthetic products.

Suggested Citation

  • Philip Arestis & Elias Karakitsos, 2010. "The Long-Term Risks to US Financial Markets," Palgrave Macmillan Books, in: The Post ‘Great Recession’ US Economy, chapter 11, pages 273-302, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-27610-9_11
    DOI: 10.1057/9780230276109_11
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:palchp:978-0-230-27610-9_11. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.