Why the Fed can’t lower rates

[*T*]

Re: Why the Fed can’t lower rates

We are one now.

The Republic of the United Socialist States of America (RUSSA)

Q: If the US is so socialist / communist why doesn't it have:

- an excellent education system
- a world-class healthcare system
- housing for its homeless

For all the bad, USSR / east Europe did have the above (& I'm assuming cuba).

I have met and worked with a lot of engineers and mathematicians over the years and these systems produced some real quality, and the general level of education and culture was very high. Not advocating the system, just making an observation.

A: Because the US, as privately-owned and centrally-planned, is closer to corporatist italy.

Sorry to be so OT.

[D-Mack]

Re: Why the Fed can’t lower rates

Q: If the US is so socialist / communist why doesn't it have:

- an excellent education system
- a world-class healthcare system
- housing for its homeless

For all the bad, USSR / east Europe did have the above (& I'm assuming cuba).

I have met and worked with a lot of engineers and mathematicians over the years and these systems produced some real quality, and the general level of education and culture was very high. Not advocating the system, just making an observation.

A: Because the US, as privately-owned and centrally-planned, is closer to corporatist italy.

Sorry to be so OT.

Full employment, at least in the communist country I had experience with.

I recently watched a docu on the GDR, where they assembled cars and most of it was done manually, the guy putting in the doors used a wooden hammer to deform the door so it fit better. It was funny to watch.



To get back to the rates I remember Roubini last month talking about 0-1%

The Fed will have to cut the Fed Funds rate much more as severe downside risks to growth and to financial stability will dominate any short-term upward inflationary pressures. Leaving aside the risk of a collapse of the US dollar given this easier monetary policy the Fed Funds rate may end up being closer to 0% than 1% by the end of this financial crisis and severe recession cycle.
http://mercatoliberonews.blogspot.co...crisis-in.html

[Guest]

Re: Why the Fed can’t lower rates

To get back to the rates I remember Roubini last month talking about 0-1%

Is it possible to even conceive of a strengthening US dollar with rates at zero? What if we are all wrong, and this inexplicably occurs? Will we find the explanations subsequently?

[Chris Coles]

Re: Why the Fed can’t lower rates

Q: If the US is so socialist / communist why doesn't it have:

- an excellent education system
- a world-class healthcare system
- housing for its homeless

For all the bad, USSR / east Europe did have the above (& I'm assuming cuba).

I have met and worked with a lot of engineers and mathematicians over the years and these systems produced some real quality, and the general level of education and culture was very high. Not advocating the system, just making an observation.

A: Because the US, as privately-owned and centrally-planned, is closer to corporatist italy.

Sorry to be so OT.

But you are not off topic at all. Once the dust settles, there is a desperate need to debate the whys and wherefores and take on the need for a complete review of the necessary long term aiming points.

Old fashioned, (as of this week), capitalism has not worked. We need a new, Free Enterprise based initiative. That makes your comments right on the button.

[jk]

Re: Why the Fed can’t lower rates

Is it possible to even conceive of a strengthening US dollar with rates at zero? What if we are all wrong, and this inexplicably occurs? Will we find the explanations subsequently?

i've imagined more impossible things before breakfast.

the question is "WHICH rates at zero?" the fed funds rate went to 6% the other day while the target rate remained at 2% if the scramble for liquidity worsens, i can imagine interbank rates remaining relatively elevated while the official targets and discount rates are quite a bit lower.

[marvenger]

Re: Why the Fed can’t lower rates

but doesn't the now present effects of financial market deregulation show this unbridled free enterprise is inherently unstable once the game gets to a certain size.

I'm for competition on a smaller scale, people naturally have to self regulate their competitive tendencies in this situation to avoid social exclusion, once the game gets too big however it becomes winner takes all and hence there's instability. Government officials who can't be bought (regulations against all kinds of perks and reimbursemet) and accept standard wages with maybe two three times median incomes for top officials have to regulate activities once they get to this scale. Good competetent people still actually accept these wages, more will when wall st execs are allowed to get paid what they do as well. The deregulators are always going to be trying to push the grey area higher and higher leaving the unregulated activities smaller and smaller though.

[jtabeb]

Re: Why the Fed can’t lower rates

Keep in mind also that as times get worse, the nominal cost of survival also goes up: physical security, maintenance of lifestyle as overall lifestyle levels go down, etc.

That's why you buy guns and ammo NOW, while they are still cheap! Addresses all the points you raised.

no guns = no peace, know guns = know peace, no guns = no gold, no food, no water, no shelter...

[JoeSixpack]

Re: Why the Fed can’t lower rates

this evening on bloomberg radio there was an interview with brian sack, co-author with ben bernanke and vincent reinhart of "Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment." sack stated that when/if they lower from 2% they should do it in BIG steps - that the speed of the cuts could compensate for their relatively small room to maneuver.

I only found a snipplet of the whole interview. The funny part was where he said they should have cut rtes and then that his firm "sees the inflation fighting credibility of the Fed as very high"

Lol.

[grapejelly]

Re: Why the Fed can’t lower rates

but doesn't the now present effects of financial market deregulation show this unbridled free enterprise is inherently unstable once the game gets to a certain size.

I'm for competition on a smaller scale, people naturally have to self regulate their competitive tendencies in this situation to avoid social exclusion, once the game gets too big however it becomes winner takes all and hence there's instability. Government officials who can't be bought (regulations against all kinds of perks and reimbursemet) and accept standard wages with maybe two three times median incomes for top officials have to regulate activities once they get to this scale. Good competetent people still actually accept these wages, more will when wall st execs are allowed to get paid what they do as well. The deregulators are always going to be trying to push the grey area higher and higher leaving the unregulated activities smaller and smaller though.

I'm for pigs that fly, and a sea that is boiling hot. Seriously. The entire history of every country's government in the world is evidence that what you write is a complete fantasy, no less a fantasy than Libertarians' fantasy about an anarcho-capitalist paradise.

The whole purpose of government and regulation is to protect the entrenched wealthy and successful players, and keep people from challenging them.

Sadly, this Wall Street thing is naturally cast as free enterprise gone amok but there is nothing free about it.

1. The Central Banks printed oodles of dollars by letting banks create money at will.

2. This money went into asset appreciation.

3. A mania began because of cheap and easy money.

4. The mania and the asset appreciation are a complete result of government interference.

5. The crash happened as it always does. Now it is government blaming the "free market types". Well I'd like to see a free market. This ain't one.

[Chris Coles]

Re: Why the Fed can’t lower rates

I'm for pigs that fly, and a sea that is boiling hot. Seriously. The entire history of every country's government in the world is evidence that what you write is a complete fantasy, no less a fantasy than Libertarians' fantasy about an anarcho-capitalist paradise.

The whole purpose of government and regulation is to protect the entrenched wealthy and successful players, and keep people from challenging them.

Sadly, this Wall Street thing is naturally cast as free enterprise gone amok but there is nothing free about it.

1. The Central Banks printed oodles of dollars by letting banks create money at will.

2. This money went into asset appreciation.

3. A mania began because of cheap and easy money.

4. The mania and the asset appreciation are a complete result of government interference.

5. The crash happened as it always does. Now it is government blaming the "free market types". Well I'd like to see a free market. This ain't one.

I had put this up recently to debate the reality of a free marketplace and what it should look like.

Enjoy!

http://www.itulip.com/forums/showthread.php?t=5166

[LabMonkey]

Re: Why the Fed can’t lower rates

I'm still new to these subjects and was hoping someone could explain a couple things I've been pondering.

the Fed pumped in more cash

I think I understand the process of cutting rates, but what does "the Fed pumped in more cash" mean? Is that printing without putting up bonds for auction?

To avoid "Poom" the Fed has to be brilliant and coordinate brilliantly with foreign central banks and Congress. The record is spotty, and our faith is limited.

What would a coordinated effort look like?

[c1ue]

Re: Why the Fed can’t lower rates

That's why you buy guns and ammo NOW, while they are still cheap! Addresses all the points you raised.

no guns = no peace, know guns = know peace, no guns = no gold, no food, no water, no shelter...

JT,

Having a gun or several guns might be enough in Randolph, Texas - especially if you're better with them than the other guys.

But it won't matter in any significant metropolitan area. Not unless you've stashed a 50 cal M1 with extra barrels and 100K rounds, and are able to not have to forage for 3 months - long enough for all the others to starve.

Cheaper to just not be around when TSHTF.

[phirang]

Re: Why the Fed can’t lower rates

China is in for $200B worth of T-bills.

Russia, GCC, Brazil, and Japan will also cough up for another few hundred bill of bills.

Result? The $700B bailout is paid for. Cash. Nice, eh?

[The Outback Oracle]

Re: Why the Fed can’t lower rates

China is in for $200B worth of T-bills.

Russia, GCC, Brazil, and Japan will also cough up for another few hundred bill of bills.

Result? The $700B bailout is paid for. Cash. Nice, eh?

And when that $700B runs out?
Sorry I'm following you around,,,not to be disagrreable...I like to learn!

[Supercilious]

Re: Why the Fed can’t lower rates

Quote:

Originally Posted by EJ The Fed knows this. It is doing everything it can to keep inflation above zero and maintain dry powder, and that means keeping the Fed Funds rate target over 2%.

I wouldn't be surprised to see that target lowered lowered significantly in the near future by an "emergency" meeting.

I don't think such an "emergency" will be a sign the Fed is forced to do something or can't do anything else. IMHO it would be a sign that everything goes according to the plan and industrials are the future miracle for the next 8-10 years.

As I was saying 2 weeks ago the Fed can actually lower the rate significantly because the dollar is not in the same league as the Argentinian Peso, or Yeltsin's Ruble.

The dollar is in a league of its own, and the Fed can do whatever they want in order to accumulate more power and more global influence.

IMHO, today's move is not a sign of panic on Bernanke's part, just gathering ingredients for the next phase of the shock therapy, which I guess would be a short inflationary spike that would make everybody run in circles yelling : "Oh God, hyper-inflation!!! Ben help us pppllleeeeaaaaasssseeee !!!"

And of course Ben, will "help" us by drilling more into our income, wallets and retirement piggy banks.

I hope that everybody understands that in the previous sentence "us" is not used restricted to US .... by the contrary :mad: