Share your insights or perspective on the financial matter presented in the input.

Why do interest rates increase or decrease?
Fundamentally interest rates reflect the time preference people place on money and the things money can buy.  If I have a high time preference then I prefer money in my hand versus money promised to me at some date in the future.  Thus, I will only loan my money to someone if they offer me an incentive which would be an amount of money to be received in the future that is larger than the amount of money I’m giving the debtor in the present (i.e. the interest rate). Many factors go into my time preference determination.  My demand for cash (i.e. my cash balance), the credit rating of the borrower, the length of the loan, and my expectation of the change in currency value are just a few of the factors that affect what interest rate I will loan money. The first loan I make will have a lower interest rate than the last loan, ceteris paribus.  This is because my supply of cash diminishes with each loan which makes my remaining cash more valuable and a higher interest rate will be needed to entice me to make additional loans.  This is the theory behind why interest rates will rise when QE3 or QEinfinity ever stops.  QE is where the Federal Reserve cartel prints new money to purchase bonds from cartel banks.  If QE slows or ends the supply of money will stop increasing which will make cash more valuable and higher interest rates will be needed to entice creditors to loan money. Note that increasing the stock of money does not necessarily result in lower interest rates.  As stated earlier, the change in value of the currency also affects the interest rate lenders are willing to accept.  If the Federal Reserve cartel deposited $1 million everyday into every US citizen’s bank account it wouldn’t take long before lenders demanded very high interest rates as compensation for the decrease in the value of the currency. Does the Federal Reserve cartel affect interest rates?  Yes, in two ways.  First, as mentioned before, it prints new money that is loaned to the government.  It either purchases the bonds directly or purchases the bonds from cartel banks which give them cash to purchase more government bonds.  This keeps demand high for government bonds which lowers the yield on government bonds (yields move inverse to the price of the bond).  The Federal Reserve cartel also can provide an unlimited amount of funds at the Federal Funds rate to the cartel member banks.  Banks can borrow at this rate and then proceed to make loans at a higher rate and pocket the difference. Remember, however, that the Federal Reserve cartel is not the only market participant.  Other bond holders, such as foreign governments and pension funds, buy and sell US bonds.  At some point they could demand higher rates.  The Federal Reserve cartel, which currently holds close to 17% of US public debt, could attempt to keep rates low by printing new money to buy all existing US bonds to prevent the yield on bonds from going up.  At that point, however, holding US dollars becomes very dangerous as it is apparent the Federal Reserve cartel is just a money printing machine for the US government.  That’s when most people begin to dump dollars en masse.