The Jump-Start that Hasn't Started

[Verrocchio]

Click on the link below for the rest of this New York Times article:

WHATEVER became of the much-ballyhooed Fed rally?

Last September, investors clamored for the Federal Reserve to start cutting interest rates aggressively — not only to stave off a possible recession, but also to give a lift to the stock market.


Well, nearly half a year has passed since the Fed began to lower short-term rates, last Sept. 18. But this time, the S.& P. 500 has lost more than 12 percent of its value.




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How much of an interest rate jolt will it take to get the economy and the market to start climbing again?

[Rajiv]

Re: The Jump-Start that Hasn't Started

How much of an interest rate jolt will it take to get the economy and the market to start climbing again?

If you are already in debt way over your head -- are you going to borrow any additional money? Lowering interest rates is only an inducement to borrow -- but ultimately the decision to borrow resides with the borrower. The banks are a for profit organization, and not a charitable fund -- so they will never give away money -- and any rational borrower has to see that the money borrowed has to be repaid with compounding interest. So the borrower has to see sufficient advantage, net of costs, to borrow.

Currently it appears that borrowers are unwilling to enter into new loans at the interests being charged -- therefore debt deflation and money supply shrinkage will continue -- and the stock market will continue to decline.

[Verrocchio]

Re: The Jump-Start that Hasn't Started

The banks are a for profit organization, and not a charitable fund -- so they will never give away money

That's an unarguably true statement, Rajiv, in the past, for now, and for evermore. Confirming evidence -- as if it was needed -- that banks are not charitable organizations can be found in the recent increase in the 30-year fixed rate to 6.41%. This rate has been climbing while the cost of money to the banksters has been dropping, thanks to the Fed.

In a surprising reversal, some homeowners have chosen to pay their credit card minimum payment while letting their mortgage payments slide into arrears. In the olde days bankers could count on getting theirs first, but that's not holding true these days. One interviewee explained that she looked at her credit cards as essential to her cash flow, and she couldn't risk losing that!