What is the Federal Reserve's rationale for such low rates?
- Thread starter Cutten
- Start date
your questions are so childish, and refreshing as to be honest in nature and nieve in reality. Soooo, how much software you wanna buy?
America is and has been in the worst Depression that it never wanted to admit. Worse than the 1929-1934 depression that was resolved by the massive spending on war bonds, during the WWII campaign.
America is playing with its citizens and trying to balance the wealthy on the backs of us peasants. yes peasants. That's spelled: "anyone capitalized under the 8 figure level".
America is jerking with itself with this recent declaration that the Recession began during the Clinton Nov 2000 conclusion/presidency and not with the March 2001 / Bush presidency. Yes the Democrats got off the gas a full 12 months before the coming election, and took their marbles home. The idea was something along the lines of if you reelect our ticket then we will return our marbles (i.e. economic policies that produced the strongest economy in human history) back on the board. So, perhaps it did start during the end of the previous administration.
Losing 7 million jobs, of which they will only recognize some 3.5 million of those as being lost. Remember, for every working person in those office towers for the recognized company names that we trade every day produces two - three additional support jobs. Dry cleaning, grocery, video rental, baby sitting, auto repair, mortgage services, luncheon stores, restaurant jobs and all other support jobs are no longer needed when those who used to work 16 hour days suddenly have their 16 hours back.
The stock market is booming on borrowed funds made available by increasing the M2 & M3 money supplies. This is further fueled by the lower interest rates that are artificially kept low to prevent everyone defaulting by everyone increasing their interest rates on their credit cards, mortgages, home equity loans, auto loans, boat and vacation property loans. If we were to have the true interest rates of approximately 8.5% on home loans, 18.9% on credit cards and so forth, then defaults would result, housing markets would collapse and the reality would be realized.
GSPN (Greenspan) accurately stated on many testimonies before congress that he was fully prepared to keep rates artificially low to prevent tight money conditions, higher interest rates, higher dollar exchange rates and a general collapse in the US economy.
G. Bush and his administration were the most fiscally irresponsive administration in recent (last 150 years) history of the US.
Hype is what you've been feasting on. Listen to the economists as they review the actual numbers, on
BloombergTV,
CNBC
CnnFn
CSPAN - congressional hearings.
these aren't my words....
First of all, there really is no point in accepting what Greenspan and the other central bankers argue as the biggest threats for the economy going forward. A few years back when the Fed Funds rate was significantly higher (6.00% area), Greenspan spoke of potential inflation at all times. Then over the course of two years the Fed lowers rates to obscene levels and jawbones about no inflation present in the economy. Inflation is everywhere, except in the CPI. The individuals who I respect as great market minds have been postulating for the past year or so that this is the Fed's attempt to re-flate away all of the outstanding debt. Keep rates artificially low for an extended period of time, re-inflate the bubble in different sectors and give some pricing pressure to companies to be able to re-inflate away all the debt that had been issued and continues to be issued. Let's not forget that debt issuance continues to churn along at record pace.
As far as this situation with a falling dollar and a continued bid in treasuries(albeit there was a spike lower today), I am just led to believe that its a technical anomaly. Alot of talk about various carry trades, or even just big dumb allocations that can spike these interest rate markets all over the place. THis market is just awash in liquidity. I believe Waggie has been making this argument for month's, and I really think that is the most valid argument for everything we see.
As far as this situation with a falling dollar and a continued bid in treasuries(albeit there was a spike lower today), I am just led to believe that its a technical anomaly. Alot of talk about various carry trades, or even just big dumb allocations that can spike these interest rate markets all over the place. THis market is just awash in liquidity. I believe Waggie has been making this argument for month's, and I really think that is the most valid argument for everything we see.
Where did you get this stuff, off the Kucinich or Dean websites?
A historian, you are not. If the NASDAQ bubble, recession and job losses were followed (after an 18 month respite) by another event of similar depth and length, THEN you'd have a freakin great depression. So far, this ain't it.
limitdown,
Makes a good point however I think it is a bit extreme in saying that this administration is the most fiscally irresponsive administration in recent years.(last 150 years).
I do agree that the job situation is horrendously worse than the government is willing to admit however they did take the necessary steps in helping the economy recover to the degree it has, etc tax cuts, interest rates.
I also agree that individuals are in tremendous debt, similar to our national deficit, however that is not the governments fault for making money cheap to borrow. After all we are a nation that has grown up on debt. We like having nice things, etc house, cars. I donât think Americans have the same idea about housing for example that our parents had. We think of house like leasing a car. We pay for usage, short term use. Although we still own the house at the end, we are extending ourselves because if the housing market takes a minor step backwards many people will not be able to recoup the debt + principle to sell the house for a profit. This happen in the 80âs. You will see bank foreclosing as a last resort however the banks donât even what to foreclose because of the depreciate value of the house. The banks will lose money on the investment.
Things could be and still can get a lot worse (when interest rates rise substantially). They are not there yet and perhaps for the very reason you feel this administration is the most fiscally irresponsive administration in 150 years.
Makes a good point however I think it is a bit extreme in saying that this administration is the most fiscally irresponsive administration in recent years.(last 150 years).
I do agree that the job situation is horrendously worse than the government is willing to admit however they did take the necessary steps in helping the economy recover to the degree it has, etc tax cuts, interest rates.
I also agree that individuals are in tremendous debt, similar to our national deficit, however that is not the governments fault for making money cheap to borrow. After all we are a nation that has grown up on debt. We like having nice things, etc house, cars. I donât think Americans have the same idea about housing for example that our parents had. We think of house like leasing a car. We pay for usage, short term use. Although we still own the house at the end, we are extending ourselves because if the housing market takes a minor step backwards many people will not be able to recoup the debt + principle to sell the house for a profit. This happen in the 80âs. You will see bank foreclosing as a last resort however the banks donât even what to foreclose because of the depreciate value of the house. The banks will lose money on the investment.
Things could be and still can get a lot worse (when interest rates rise substantially). They are not there yet and perhaps for the very reason you feel this administration is the most fiscally irresponsive administration in 150 years.
very well said....
I essentially paraphrased (I stated these were not my words) the commentators, Senators and other Congressional Representatives who were on the CNBC and CnnFn news channels during today's trading (Friday, 1/23/4)...
those conclusions were their words, and they weighed heavily....
one in particular was the fact that the deficit is over 1/2 Trillion dollars after having been in 1billion+ surplus. That Senator also stated that they're using over $600 million from Social Security to make it appear (the true deficit) lower than what it is. That is dishonest, dispicable, partisian and has a horrendous effect upon our young generation who will pay for this. The politically nice term for that statement is fiscal irresponsible behaviour.
we all benefit in 2 important ways from the lower interest rates:
A our personal cost to carry remains bearable
B the US has devalued the Dollar without admitting that they've devalued the dollar, hence making our exports more desireable....
OOOOPPPPssss we no longer manufacture exports.......
discipulus
Guest
The Federal Reserves rationale is based upon the weak footing of populist economic theory.
The popular held views that for some unknown reason falling prices is a doomsday scenario, the idea that the be all and end all of economics is consumption, that the squandering of capital and debt accumulation is good and that despite the so called 'rolling back' of the state and 'free markets', a government infact 'manages' the economy and that a centrally planned money is required.
This all runs in contrast to history, where prior to the madness, money was a free market, and, it was a hard money and where prices continuously fell for decades.
I imagine most mainstream economists dont even know what money is and what are its functions and how they should be determined, i.e. the rate of interest.
No one today as far as the mainstream is concerned can successfully argue that the government should have a monopoly on the production of cars, the idea would be shot down instantly. Yet there is no opposition to the government manipulating the supply of money at whim and its rate of interest. How is such a position justified?
The popular held views that for some unknown reason falling prices is a doomsday scenario, the idea that the be all and end all of economics is consumption, that the squandering of capital and debt accumulation is good and that despite the so called 'rolling back' of the state and 'free markets', a government infact 'manages' the economy and that a centrally planned money is required.
This all runs in contrast to history, where prior to the madness, money was a free market, and, it was a hard money and where prices continuously fell for decades.
I imagine most mainstream economists dont even know what money is and what are its functions and how they should be determined, i.e. the rate of interest.
No one today as far as the mainstream is concerned can successfully argue that the government should have a monopoly on the production of cars, the idea would be shot down instantly. Yet there is no opposition to the government manipulating the supply of money at whim and its rate of interest. How is such a position justified?
Thanks guys, I got a really good case of the giggles reading all the Socialist remarks posted about how bad things are here in the U.S. ( obviously a # of the posts are from foreigners). First of all the average families net worth has just recently surpassed the 'lofty' levels from the late 90's (largely because of home values). Seeing this is the case its hard to see how this is 'worse' than the Great Depression (lol). Everyone wants lower rates. The only ones that don't are foreign investors that want high US rates to invest here. As long as inflation is tame, the FED 'wants' to keep rates low to spur spending (borrowing is cheaper and we all buy on credit) and therefore the economy. Greenspan's vision of housing remaining strong thru an economic pullback, because of low rates, was genious - pure genious! 
Quote from Tide31:
Thanks guys, I got a really good case of the giggles reading all the Socialist remarks posted about how bad things are here in the U.S. ( obviously a # of the posts are from foreigners). First of all the average families net worth has just recently surpassed the 'lofty' levels from the late 90's (largely because of home values). Seeing this is the case its hard to see how this is 'worse' than the Great Depression (lol). Everyone wants lower rates. The only ones that don't are foreign investors that want high US rates to invest here. As long as inflation is tame, the FED 'wants' to keep rates low to spur spending (borrowing is cheaper and we all buy on credit) and therefore the economy. Greenspan's vision of housing remaining strong thru an economic pullback, because of low rates, was genious - pure genious!
low rates-credit expansion-inflation!!- wealth transfer from savers to borrowers- welfare state- socailsim!!!
you don't know your left from your right ..man..
and in case you are not aware of it, foreigners are the largest creditors of the US, so they do have a interest in the US 's prosperity.