Would The Fed Cut Rates This Close To Election

[makloda]

Quote from m22au:These kinds of things will probably happen even with interest rate cuts, and if they don't, it may be because of government intervention - eg.

Yes, they do happen even with rate cuts, but arguable rate cuts can help cushion against irrational panic and bank runs. The question is how bad would it have been if the Fed hiked rates instead? Who can rule out the (remote) possibility of the financial system melting down completely "beyond a point of no return" as in 1929?

IMO this is a point that the free market advocates elegantly forget in their argumentation. Many markets are inherently imperfect and come with externalities, this is why we have intervention and regulation.

 

[makloda]

Quote from Aaron Copland:Know one is benefiting from the rate cuts, show us were the improvement is, and just show us the facts.

You still can walk down the block to you bank and do business, can't you? Or do you see a "Sorry, we're closed indefinitely for vacation. Come back later." sign on the door?

There's your benefit right there. Send Bernanke a thank you card.

 

[Aaron Copland]

Quote from makloda:

Yes, they do happen even with rate cuts, but arguable rate cuts can help cushion against irrational panic and bank runs. The question is how bad would it have been if the Fed hiked rates instead? Who can rule out the (remote) possibility of the financial system melting down completely "beyond a point of no return" as in 1929?

IMO this is a point that the free market advocates elegantly forget in their argumentation. Many markets are inherently imperfect and come with externalities, this is why we have intervention and regulation.

Sounds like you’re a socialist.

 

[Aaron Copland]

Quote from makloda:

You still can walk down the block to you bank and do business, can't you? Or do you see a "Sorry, we're closed indefinitely for vacation. Come back later." sign on the door?

There's your benefit right there. Send Bernanke a thank you card.

That’s pretty weak, Thank him that I can get my own money from my bank. The depository banks should get the feds help. My beef is with the investment banks getting access to the discount window that is illegal. And someone will have to answer to this.

I’m sure its that freak Paulson helping his dumb ass friends on wall street who couldn’t turn a profit off a lemonade stand, know they make there money off mom and pops 401ks and telling lies to pension funds and states.

 

[m22au]

I understand your argument.

I will go one step further and propose that the reason why bank runs are possible is that we have fractional reserve banking, and not because interest rates are held too high.

If you are to enjoy the benefits of fractional reserve banking, then it follows that you must assume its risks, which include the possibility of bank runs.

I don't have a problem with the financial system going "beyond a point of no return as in 1929?". I believe that fractional reserve banking should be abolished, however I realise that in 2008, this would be difficult to achieve.

When asked asked what he would do if he was Federal Reserve Chairman, Jim Rogers stated that he would resign.

I would do the same.

As I mentioned in my previous post, neither of us is right or wrong - it's just that we have two differing views on the extent to which governments should get involved.

Quote from makloda:

Yes, they do happen even with rate cuts, but arguable rate cuts can help cushion against irrational panic and bank runs. The question is how bad would it have been if the Fed hiked rates instead? Who can rule out the (remote) possibility of the financial system melting down completely "beyond a point of no return" as in 1929?

IMO this is a point that the free market advocates elegantly forget in their argumentation. Many markets are inherently imperfect and come with externalities, this is why we have intervention and regulation.

 

[gnome]

Quote from m22au:

"... Those people (including myself) who believe that the Federal Reserve should be abolished, and/or that the US economy should be allowed to have a deep recession / depression, may still hold the view that the Fed should not have cut the Fed Funds rate to 2%.

Although these rate cuts may have delayed the inevitable recession, and/or reduced its severity, it only prolongs the inevitable. Decades of excess debt need to be taken out of the system.

Isn't it amazing how supporters heap praises on the Fed for trying to extinguish the fires THEY CREATE? Duh!!

 

[m22au]

Gnome - I agree completely. I wouldn't ask an arsonist to help me put out a fire.

Quote from gnome:

Isn't it amazing how supporters heap praises on the Fed for trying to extinguish the fires THEY CREATE? Duh!!

 

[makloda]

Quote from m22au:As I mentioned in my previous post, neither of us is right or wrong - it's just that we have two differing views on the extent to which governments should get involved.

I agree, there are different schools and philosophies.

With the Soviet Union gone, we lack a good comparison as to how different economic systems perform these days. I would love to see a sizable developed economy (got any recommendations?) abolish all but the most necessary government functions (what is necessary? Anything?) and operate purely on supply and demand. Health care, public infrastructure, universities, education, banking system. It would be instructive to see how such an economy would perform compared to the G7 nations.

An interesting experiment, I wouldn't want to be a part of it though.

 

[covered_call]

The Fed certainly could cut rates this close to the election. They would never raise rates this close. Raising rates would effectively crush the standing president and his party as rate hikes hurt the public ability to attain loans and increased the floating rate payments (not just mortgages, credit cards also).

That said, I don't expect anything to happen before the election.