I am getting the impression that there is a desire for a recession by the fed. Why else would they keep scaring the markets by lowering the rate so fast and so often? If there was anything that could help the housing market, loans, bond issue it would be coming up with a federal funded rate reduction on the troubled loan sector. This would help without bailing out the banks directly. They could use a system like the first time home buyer loans that are government backed, that is at a lower rate than normal loans.
The recession is already here. They are trying to shock the markets, this is what Bernanke based his academic career on. The theory that you can resuscitate financial markets with fast, hard and frequent credit injections. That a market doesn't have to be sound to find it's footing. Just liquid. And Earl claims I am not realistic. lmao So your answer is that they should continue to prop up the bubble by being more sneaky about it? * guerilla's head explodes
The bubble wouldn't be propped up. For most areas it has popped. We are seeing some prices increase on existing homes around the west coast already. What the financing help would do is level out the rate increases people are seeing with being stupid. Do I think it is a great idea? Not really, but it would have better lasting affects than what the fed is doing right now. The fed is telling others that the dollar is worthless, so the more they do this the lower the dollar becomes, the higher oil and gold go. The fed should hold off and leave the rates alone right now. Government should NOT bail out any banks directly for sure, but if they do get involved do it in a way that it helps many people, not just the rich guys at the banks. Your head must have already exploded. You come in judging my post without even thinking. Sorry.
No, many ARMs must still reset. This is bigger than the price of housing now. It's spread to other SIVs like securitized credit debt. I'd say we are close to halfway through the mortgage mess, but the fallout for financials will carry on even when housing prices have adjusted back. And yes, it is a bubble, and yes what you are talking about is what they did in 2001 with the tech bubble and 9/11 panic. You are saying they should try to keep the good times rolling, at the expense of someone else. When you make mortgages easier for first time home buyers, you make the market more expensive for people who want to change homes, move or buy a second home. Basically showing favor to one group or demographic at the expense of the other. You don't want to hear this, but the dollar is almost worthless. It's backed by nothing, it's printed at will, by a country that is insolvent, and is the world's largest debtor nation. Smart money like Warren Buffet, Jim Rogers, Peter Schiff already know this. They have known for some time. Even if they leave the rates alone, they are too low. We don't have a savings based (read: capital) economy anymore, because saving doesn't pay. Credit is easier, it's fast and in an inflationary cycle, it's potentially cheaper. But understand, if they intervene to help anyone, it will hurt someone else. That's called moral hazard. Actually, there is a big and ongoing (daily) thread covering all of this. You're upset that the FED is intervening in an obvious way, you wish they would hold off to intervene later or do it in a less obvious way than dumping rates. But that's all the FED can do. Lower rates or raise rates. And they do that by creating or destroying credit in the system. This new stunt they are trying with the $200 billion, is actually outside their normal operational procedures. But since they are a shadow government agency, they write their own rules.
Depends how you define direct. It's not immediate but there is usually a commensurate reaction to the action of lowering rates over time. Lowering rates is done by creating more credit (liquidity) in the system. The more liquid the banks are, the less they will pay for your savings and investment. And the cheaper they can afford to make loans. It's supply/demand of the money supply that in reality dictates rates. hth
I agree with this....for most of the problems in the credit area we can fault the banks and stupid people anyway...
yes, it makes the American pesos go even more down compare to other currencies and push up the price of commodities.