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The subprime mortgage mess: why lower interest rates will not resolve the credit crunch in the near term.(selected topic)

Business Credit

| April 01, 2008 | Gomez, Lucas | COPYRIGHT 2008 National Association of Credit Management. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)Copyright

It's been almost three years since I wrote"Rising Interest Rates and the Impact on Accounts Receivable" for the May 2005 issue of Business Credit. Briefly, the article highlighted how companies that rely on outside financing have deficient cash flows and frequently report poor financial performance are eventually dragged into serious financial problems when interest rates rise. I did not suspect back then that I would now be dispelling the myth--under the prevailing grim economic landscape--why lower interest rates alone will not benefit companies in debt, nor will they be enough to cure the existing credit crisis. Under normal conditions, lower interest rates increase ...

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