The Imminent High-Yield Debt Catastrophe
The Imminent High-Yield Debt Catastrophe
High-yield debt investments, which are often called junk bonds, are investments that typically have lower credit ratings and higher risks, but many investors choose these vehicles to receive higher yields when traditional stocks and investments are only generating modest returns. China 's economic problems and heavy investments in high-yield debt have exacerbated the problems of investors tying up too much money in one kind of investment -- especially one as risky as junk bonds. A report posted on /money.usnews.com places the blame for this trend on the Federal Reserve Bank because "investors have been forced by the Federal Reserve 's policy to take on more risk to obtain yield on their investments." Before 2008, for example, investors could earn 5 to 6 percent interest on CDs, but yields have since dropped to almost nothing due to …show more content…
Almost any paper investment can be completely lost due to market turmoil, stock crashes and manipulation by governments and economic powerhouses that are “too big to fail." Everything in economics is fueled by many factors such as supply and demand, market conditions, inflation rates and other key performance indicators. Any business or investment can fail, and any individual or business could need ready cash to survive during the downturn. That 's why capping interest rates for the payday lending industry is so disingenuous and dangerous. During catastrophes -- which are often engineered by investor excesses and financial malfeasance by big banks -- people can take some comfort in the ability to get cash to tide them over during economic upheavals. Choosing how people spend their money and with whom they can do business challenges the basic principles of free enterprise under which most of the world
The Imminent High-Yield Debt Catastrophe
High-yield debt investments, which are often called junk bonds, are investments that typically have lower credit ratings and higher risks, but many investors choose these vehicles to receive higher yields when traditional stocks and investments are only generating modest returns. China 's economic problems and heavy investments in high-yield debt have exacerbated the problems of investors tying up too much money in one kind of investment -- especially one as risky as junk bonds. A report posted on /money.usnews.com places the blame for this trend on the Federal Reserve Bank because "investors have been forced by the Federal Reserve 's policy to take on more risk to obtain yield on their investments." Before 2008, for example, investors could earn 5 to 6 percent interest on CDs, but yields have since dropped to almost nothing due to …show more content…
Almost any paper investment can be completely lost due to market turmoil, stock crashes and manipulation by governments and economic powerhouses that are “too big to fail." Everything in economics is fueled by many factors such as supply and demand, market conditions, inflation rates and other key performance indicators. Any business or investment can fail, and any individual or business could need ready cash to survive during the downturn. That 's why capping interest rates for the payday lending industry is so disingenuous and dangerous. During catastrophes -- which are often engineered by investor excesses and financial malfeasance by big banks -- people can take some comfort in the ability to get cash to tide them over during economic upheavals. Choosing how people spend their money and with whom they can do business challenges the basic principles of free enterprise under which most of the world