Fed Slashes Rates to 3.5%

As the article says...

They had to do something to try and calm the markets. One of these days we'll have another worldwide panic and the Fed will find themselves with no room to lower rates further...

 

yes it does contribute to inflation some.

 

Yes, and it contributes to a weakening dollar as well.

 

When the recession hits, you will have lots of people unemployed and the inflation caused by the lower interest rates are going to be a nasty combination.

If the economy does not strengthen and soon...things are going to get very, very ugly.

 

The feds just showed us all it's card, now it's gonna be out of tricks, so if this doesn't work, then hell people won't be able to look to them to do more. I think this was a knee jerk reaction, and long term this is going to just worsen the situation. The Republicans better hope it works.

 

I like how all you experts are criticizing the chairman of the Federal Reserve as if you actually know something about economics and the present economic situation present today.

Here are some actual economists on the rate cut: http://www.economist.com/blogs/freeexchange/2008/01/helicopter_ben_to_the_rescue.cfm

 

No. The Fed did not. But of course they did. Let's blame the Bush appointee!!!

 

This had to be done to avoid an even bigger credit crunch.

 

I paid over $5 bucks for 3 peaches at H.E.B. My daughter loves fresh peaches in her lunch, but damn!

This crisis? Given current conditions, isn't lowering rates a good move? I'm not happy about what appears to be a panic move by the Fed, though. Was it simply too long before their next meeting? We haven't had a move like this from the Fed since just after 9/11.



Impeach Bush.

 

Basically, yes.

 

Let me unravel the spin for you-

The Fed only cares about how much money banks can make. They are bankers. And inflation is not low now and hasn't been for quite a while. Mr. Salmon is correct that hopefully this tactic will help prevent a gut renching reality check by investors. The housing crisis and subprime mortgage crisis are only the big stage show of years of flooding the world economy with easy debt. The current reaction in the stock market is simply due to a little shaking amoung big investors who were fleeing far before the new year. Cutting the Fed rate is supposed to encourage more liquidity through more debt BUT WAIT the problem itself is caused by debt. Do you see the picture?

A recent indicator of a deteriation of real economic activity is a nice way of saying that there are too many bad loans out there and alot of people are going to lose money, that there are not any debt bubbles left to send cash pumping through the system and unless people have a bunch of cash in the mattress we are probably already in the throws of a recession.

What this really means is that investors are afraid that the consumer cannot bail them out and that somehow the Fed can produce another bubble without consumer spending which should make everyone fearful.

This is no psychological game, loans are in default. They need to pump money into the system, I just hope there is another bubble out there to keep things going, at least for a few more years.

Since we are all playing games with a huge debt load, a stimulus package and more aggressive rate cuts just might slow down the tick tock for this time bomb. At least I hope it works. Nobody wants to have to go through the kind of correction that's coming.

 

Does this mean I can get a loan with excellent rates?

 

When someone is going bankrupt with bad loans and they can't even pay the interest on their debt, giving them another loan isn't helping.

A big credit crunch plus more credit = One big mutha credit crunch

 

This is scary...As we lower our rates, people will have less interest in buying our debt...Then the dollar will really devalue and we're in big trouble...

 

Actually, it looks like this was done to help out the bond insurers (CDS counterparties). If a bond insurer fails like Ambac did last week it loses its AAA rating. Meanwhile state governments need bond insurance in order issue debt, and tons of investors require bond insurance from AAA rated underwriters. Once these insurers start falling, it could finish off the bond market.

Meanwhile, expect a huge backlash against S&P and Moody's. They are going to get bludgeoned with lawsuits for giving the bond insurers AAA ratings. Word is that both of them will be out of business within the next year or two.

 

The economy is going into a recession. And it will probably turn into a depression, thanks to the trillion dollar debt we have. This was bound to happen when we went off the gold standard...

 

This was a shocking rate cut, a record for the Fed. Not at all business as usual when dealing with a potential economic downturn. What concerns me is what made them do it, the underlying reasons. This is larger than the cut they made right after 9/11 and larger than cuts they've made in response to some famous stock market crashes. No, I'm not talking about 1929, but the ones we've had the last 2 or 3 decades.

This was a big deal, folks. Inquiring minds want to know, why?



Impeach Bush.

 

I'm no economic expert... but I think the fed was looking at (by wealthy folk standards) controlled inflation and desperation by bond insurers looking at junk credit ratings and going t*** up.... and banks not wanting to loose hundreds of billions of (additional) dollars.

 

wow. I havent seen a gold standard post in a while