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Post by danreller on Jan 22, 2008 7:49:38 GMT -6
It was at 1024 PM in Japan that CNN had Breaking News that the FED has cut the Fed Fund Rate by 3/4%.
WOW, Bernanke and Co. must be Very Worried about the state of the US economy. The announcement was a week early and came before the US stock markets opened after a 3 day weekend and after big drops in world stock exchanges.
Will it help?
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Post by danreller on Jan 23, 2008 3:23:39 GMT -6
I just heard on CCNJ (CNN in Japan) that there are rumors that the FED is pepared to lower the Fed Fund Rate by another .50 next week.
I don't think the impact of the FED is relevant at this point.
Banks are less able to lend because of non-performing loans on their books,
Borrowers face more stringent lending hurdles. Lending has tightened up.
Yes, long term rates are Lower.
Is it enough?
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Post by beachbumbob on Jan 23, 2008 8:30:32 GMT -6
dropping the rate=crashing the dollar
capitulating to the stockmarket short term aint gonna get the economy on track. America is so screwed
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Post by unlawflcombatnt on Apr 20, 2008 18:25:34 GMT -6
The Fed's buying back of securities, the main tool for reaching the "target" interest rate, gives money directly to rich bankers, and only to rich bankers. This is done in the hope that it'll encourage them to lend more money out. Those handling the money first receive the greatest benefit. Historically, Fed handouts were confined to commercial banks. The Fed's recent extra-legal handouts, however, have extended these handouts to Investment Banks. It's part of the Fed's new "no-financial-gangsters-left-behind" plan.
It's really just another version of trickle-down economics. In this case, it's being implemented by the un-elected Federal reserve, instead of Congress. And if the Fed runs out of money, taxpayers will foot the bill.
This is "taxation without representation." It's Corporate welfare without taxpayer consent. It's a Corporate handout by a non-elected, quasi-governmental entity -- the Federal Reserve. It's quasi-governmental because its implied backing is American taxpayers, yet it is not under the control of those very same taxpayers. It is the perfect organization to facilitate "privatization of profits, with socialization of losses." When the Fed loans out money to non-regulated investment banks, with collateralization from nearly worthless paper assets (like AAA FFF-rated MBSs), it's blatant Corporate Welfare. Giving real dollars to an investment bank in the form of a non-recourse loan, then accepting knowingly worthless collateral, is not a loan at all. It's a hand-out. It's taking from the poor, and giving to the rich.
The Fed's actions are reminiscent of Feudalism, where everything is owned by the rich -- while everyone else is indebted to the rich, taxed by the rich, and controlled by the rich. Taxpayer handouts are now becoming a major "revenue stream" for the rich.
The Fed is completely out of control. Though the Fed may have had a beneficial role at one time, it has none at the present. It is now doing nothing but harm.
Bailing out rich investment banks and rich investors does not help the American people. It helps only rich American people. The Fed is not "saving" the economy. It is only "saving" its richest participants. And it is saving those rich participants at the expense of everyone else.
The economy won't collapse if Corporate America loses some of its ability to borrow money to make investments. But the economy will collapse if consumers lose the ability to purchase goods and services. There'll be no investment if consumers can't purchase the goods that provide sales revenue and profits, regardless of how much investment capital & liquidity are available. If the Fed continues to steal consumer spending power through inflation, there'll be no investment by rich investors, because there'll be no spending to create investment opportunities.
When the Fed cuts rates and pumps "liquidity" into the economy, it causes inflation — which reduces the purchasing power of existing dollars. This transfers wealth upward. It takes wealth from non-rich consumers and gives it to rich investors. In essence, the Fed is sacrificing consumer purchasing power to bolster "investment power." While increasing the real dollar-value of potential investment, the Fed is reducing the real dollar-value of consumer purchasing power, along with the sale of production. The Fed is increasing investment capital, while reducing opportunities for investment of that capital. The end result is less productive investment, not more.
By increasing the investment capital-to-investment opportunity ratio, the Fed is encouraging bad investment, mal-investment, and counter-productive investment. Again, by reducing the dollar's buying power, by giving more dollars to the rich, the Fed is reducing productive capital investment.
It seems the Fed has forgotten the "demand" side of the supply-and-demand concept. Supply does not create demand. And increasing the supply does not increase demand. As such, increasing the supply of money does not increase the demand for its investment. Worse still, if the increase in money supply is at the expense of a decrease in demand for its investment, it reduces investment. The Fed isn't just "pushing on a string." It's pulling the string in the wrong direction.
The supply-and-demand principles that apply to all other goods apply to the money supply as well. Growing more of an agricultural crop increases its sale only if the current supply does not meet demand. But if demand is already met by the current supply, no increase in sale results from increasing the supply. Even worse, if growing an excess supply of one crop comes at the expense of different, under-supplied crop, the result is less combined sale of the 2 crops.
Regarding investment capital, there is no "supply" problem. Capital investment has been declining from a decreased demand for investment, not from a decreased supply of investment capital. Increasing the investment capital supply won't increase investment, since the problem is decreased demand for investment.
When the Fed increases the supply of investment capital (through interest rate reductions and liquidity injections) it further reduces demand for its investment, because it reduces consumer purchasing power through inflation. Reduced purchasing power reduces production demand, which reduces the demand for investment to facilitate production.
The problem of reduced demand cannot be improved by increasing the supply. But it certainly can be made worse. The Fed seems determined to prove this.
I agree with Ron Paul. The Fed should be eliminated. The U.S. Treasury Dept. can print all the money needed. And Congress, which is elected by the people, can decide how much should be printed. This function needs to be returned to the people's elected representatives, instead of Corporate America's un-elected representative, the Federal Reserve.
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Post by db on Apr 21, 2008 21:59:07 GMT -6
Well said, ULC. Everyone needs to read your post. The Fed, like the Bush White House, is an unconstitutional, criminal organization.
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