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“Our federal government is subsidizing railroads, airlines, banks and farmers,” he said. “Meanwhile, we’re being taxed to death.”
So the Fed took the extraordinary step of lowering the cost of borrowing to 3%, which placed it a full 2.85% below the official blended inflation rate (and much lower still below what many people believe to be real inflation rates). In effect, what the Fed is saying is:
"Take our money. Please take our money! If free isn't good enough, how about if we pay you to borrow money? In fact, here's what we'll do. If you will borrow $1 million from us, we will let you pay us back with only $941,500, next year. In other words, we'll pay you $58,500, which is the difference between the value of the million dollars you borrow today, and the value of the million dollars with which you will pay us back a year from now (after extrapolating the last 12 months of blended inflation). Now, we will ask you to pay us $30,000 in interest (3% on one million). But that's not all bad! Because we will let you deduct the $30,000 in interest expenses, which could save you $9,000 in taxes (30% combined marginal federal and state). If you take the $58,500 difference in value between what you borrow and what you have to pay back, subtract the $30,000 in interest expense, and then add back the $9,000 in tax savings on the interest expense -- that means that we are paying you a net of $37,500 on an after-inflation and after-tax basis. All you have to do in exchange is to agree to take the use of this million dollars off our hands for a year.
"Won't you please, PLEASE take the money?"
(Yes, 3% is an overnight rate and not an annual rate, but the principles are easier to understand if we annualize. There are many complexities we do not have the room to go into this article intended for the general public, instead we are concentrating on the impact upon investors.)
...the Federal Reserve needs to cut its benchmark rate to 2 percent, reduce the discount rate to match it, and ``broaden access'' to the discount window where banks get government-subsidized temporary loans, he said. The Fed lowered the benchmark interest rate to 3 percent on Jan. 30, the second cut in nine days.
The discount window is an instrument of monetary policy (usually controlled by central banks) that allows eligible institutions to borrow money from the central bank, usually on a short-term basis, to meet temporary shortages of liquidity caused by internal or external disruptions.
On September 18, 2007, the Board of Governors of the Federal Reserve announced  a temporary change to primary credit lending terms. The discount rate was cut by 50 bp — to 5.25% from 5.75% — and the term of loans was extended from overnight to up to thirty days. (The federal funds rate was cut by 50 bp to 4.75% )
On March 16, 2008, the Federal Reserve announced  significant and temporary changes to primary credit lending terms. The term of loans was extended from up to thirty days, to up to ninety days. In contrast, less than a year ago, the term was only overnight. It also allowed collateralization of such loans by a broad range of investment-grade debt securities.
...Warren Buffett has been loading up on shares of Burlington Northern Santa Fe and was buying in January at prices only 13% below current levels...
...Railroads are far more energy-efficient than their competition. Locomotives today get 80% more mileage from a gallon of diesel than they did in 1980. As a result, trains consume far less fuel than trucks do to move the same amount of freight.
That not only saves on costs, it reduces emissions of greenhouse gases. In fact, the Environmental Protection Agency calculates that for distances of more than 1,000 miles, using trains rather than trucks alone reduces fuel consumption and greenhouse gas emissions by 65%...