Feds Drop Interest Rate by 3/4 of a point

That's a pretty big drop and they will likely drop it even more. I thought reducing the interest rate would bring on more inflation. Is that not true?

Let alone, is the interest rate drop and extra income tax refund going to be enough to turn things around?



Fed Cuts by Three-Quarter Point,
Suggests More Reductions Likely

 

Atleast it's a start. Would like to see how the global stock markets react.

http://www.investopedia.com/ask/answers/132.asp

 

Me too. What if many other countries did the same thing, lowering rates?

Would it strengthen the dollar?

 

How will they react to further debasement of the US currency?

Probably drop and dump US dollar based assets like hot potatoes and move into other currencies like the EUR, YEN, CDN, AUD etc.

This is a stupid, stupid move. Rapid inflationary measures of this sort are mostly untried in these circumstances. It's like trying to put out a fire with gasoline, in the hopes it can extinguish itself before it spreads...

 

This is the grand test, the final exam for Central Banking. Last week, central bankers in other countries were all trying to come to the FED's aid, but they have to be careful, because that is how the Depression got started.

The US domestic economy got into serious trouble trying to help the Bank of England after WWI.

 

Very interesting points.

There sure seems to be a lot of "rescuing" going on lately. BearStearns, mortgage companies and the victims, and whatever else.

And how will they pay for it, with more credit?

 

Yup. Gas can.

 

I'm concerned about interest rates on savings and investments, as well. We are getting back into a situation where interest paid on savings, CDs and bonds is less than the rate of inflation.

 

No, it would take something more radical. Like abolishing the Fed and going back to what worked

 

If other countries followed then the dollar would stay the same or rise, buy other countries are raising interest rates or holding steady which is part of the reason for the drop in the dollar.

 

The reason Bear Sterns collapsed is not because of bad debt or bad mortgages, it collapsed because its clients starting pulling money out of the firm in droves while ING wouldn't borrow Bears Sterns money on short term basis as it done previously. Had there been no fed the ramification's would be astronomical. It would of done greater damage to the economical and financial system, luckily we have a Fed while not perfect is trying to resolve the situation. Which is something you want to get rid off

 

The 3/4 drop is not going to help America's Recession. Nobody is going to be taking out a loan with the economy it is. People are waiting for their "free money" from the government coming in May. Lets wait and see how we spend it.

 

Not every country can so easily debase their currencies. Not to mention that the risk of concerted debasement through monetary inflation could lead to global hyperinflation, which could be so bad, I don't think I could imagine how bad it could be.

Basically, it was under-capitalized. Poorly managed.

Problem => Reaction => Solution.

The FED creates the problem by monkeying with rates, this causes a speculative bubble, and investment houses like BSC have to play the high risk, high leverage game if they want to stay profitable.

Then when BSC gets in trouble, the FED comes to the rescue.

The problem is, when the FED created the bubble, it devalued the savings of anyone holding cash, or on fixed incomes (welfare, social security).

Then when it fixes the problem, it devalues again.

So by creating the problem and fixing it, the FED rips a lot of people off in the process. There is absolutely no need for a Central Bank. Getting rid of it would allow people to save again, and would restore price stability.

It's actually funny that people would argue for the FED.

Great record under the FED. Why do we need it again? To clean up its own messes at our expense?

 

I'm not sure I understood you. What are "public expenses"?

 

Do you mean, public funds that are private funds which the government has confiscated (taxes) or public funds such as government debt (monetary inflation)?

The government doesn't actually have any funds, which is why I ask.

 

The point I am trying to make (which I think you understand completely) is that there are no public funds.

The government either takes the money from us, or prints the money and debases the money we hold. So in essence, all funds are private.

And if private funds have to clean up the mess, shouldn't the folks whose funds are being used own a stake?

Why do we subsidize JP Morgan buying Bear Stearns? If there were private citizens willing to bail BSC out, then they should have ended up with an ownership stake.

I can't take the gas from your car so my delivery trucks can make their rounds.

Unless the government colludes with business...