Fed slashes key rate to near zero

Fed slashes key rate to near zero

money.cnn.com

NEW YORK (CNNMoney.com) -- In its latest effort to try and stimulate the U.S. economy, the Federal Reserve cut its key interest rate to a range of between zero percent and 0.25%.

(visit the link for the full news article)

What are the implications of this? This is a sign of the times. The FED lowering the rate this low has never been done before. Do you think that this will help unfreeze the credit markets or like the other rate cuts will they do next to nothing? How long will it take for us to see some tangible evidence that their strategy is working?

money.cnn.com
(visit the link for the full news article)

Buy up physical gold and silver if you can find it this is it. Silver will be $50 oz this time next year and gold will be $2500 oz by this time next year. Can you say Weirmar Republic?

I am not a banker or knowledgeable at all.

I see the Dow up about 100 points.

If I am not mistaken, this is the rate banks can make short term loans from the "FED".
What it does is put money/credit in banks hands.

The problem with this and the bailout is:
They are taking the money and buying other banks.
They are not loosening credit and making loans to people like you and me. So, this will help banks/lending institutions, but not "US".

Originally posted by mrmonsoon
I am not a banker or knowledgeable at all.

I see the Dow up about 100 points.

If I am not mistaken, this is the rate banks can make short term loans from the "FED".
What it does is put money/credit in banks hands.

The problem with this and the bailout is:
They are taking the money and buying other banks.
They are not loosening credit and making loans to people like you and me. So, this will help banks/lending institutions, but not "US".

Yup I just created a thread today showing where the 8 trillion dollars of our money is going. Caution reading the thread will make you sick to your stomach.

www.abovetopsecret.com...

Nothing positive will happen.
America has been fooled by politicians again and again
for decades
and every 4yrs they allow it to happen again and again


is there hope?

Originally posted by mrmonsoon
I am not a banker or knowledgeable at all.

I see the Dow up about 100 points.

If I am not mistaken, this is the rate banks can make short term loans from the "FED".
What it does is put money/credit in banks hands.

The problem with this and the bailout is:
They are taking the money and buying other banks.
They are not loosening credit and making loans to people like you and me. So, this will help banks/lending institutions, but not "US".

It was the main plan actually ... at first you should help institution lending to other institution so there will be more liquidity in order to lend it to people.

Strauss-Kahn said the same thing today.

And it was expected that Fed would cut their rates to 0 till the end of 2008. they don't have much choice, but they have a lot of other instruments to help to rebuild the economy.

The said thing is that dollar will fall again as ECB said they won't cut rates on the next meeting in January.

Originally posted by mybigunit
Buy up physical gold and silver if you can find it this is it. Silver will be $50 oz this time next year and gold will be $2500 oz by this time next year. Can you say Weirmar Republic?

Yeah...that's not going to happen. Yes, gold and silver will be going up, but it won't be any where near that level, gold nuts are ignoring the fact that the ECB is dumping gold faster than the U.S. drops bombs

[edit on 16-12-2008 by yellowcard]

Well the only example is when Japan did the same thing in the 90's. And like them, it looks like we did this much too late. The Federal Reserve has been reactionary instead of proactive. Hence this is most likely too late.

Lets say it isn't too late and helps, then we are still screwed as the Fed in the future has to unwind owning EVERYTHING

Here is an excellent article that will help

market-ticker.denninger.net...

Karl thinks that this decision could take us to war......scary.

Originally posted by yellowcard

Originally posted by mybigunit
Buy up physical gold and silver if you can find it this is it. Silver will be $50 oz this time next year and gold will be $2500 oz by this time next year. Can you say Weirmar Republic?

Yeah...that's not going to happen. Yes, gold and silver will be going up, but it won't be any where near that level, gold nuts are ignoring the fact that the ECB is dumping gold faster than the U.S. drops bombs

[edit on 16-12-2008 by yellowcard]

They are price manipulating. That is the only reason why gold and silver is where it is. Give it time and the free market will win out leading to a revaluation of the metals. Im willing to bet u a steak dinner on it.

[edit on 16-12-2008 by mybigunit]

Oh, that's nice! I don't know what this means, really. All I could hope for is that ALL lending would slash their interest rates to near zero, too. Now that would really stimulate the economy, whereby people could charge more on their credit cards without worrying about the next balance being too high due to interest rates and other charges/fees.

*shrug*

The effective rate has been near zero for weeks now. Today's move itself is largely symbolic; acknowledging that which is already there, if you will.

IMO the most notable part of today's announcement is the text that went along with it.
"Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters."
-- in English, deflation is here in spite of everything Ben & Co have been doing it prevent it, and it will get worse in coming months/years. Many people knew this already, but now it's out there for everyone to see.

reply to post by anachryon


And if i'm not mistaken, in a deflationary period there's even *less* reason to invest in commodities like gold, correct? Isn't gold a hedge against hyperinflation?

Originally posted by Vault-D
reply to post by anachryon

 

And if i'm not mistaken, in a deflationary period there's even *less* reason to invest in commodities like gold, correct? Isn't gold a hedge against hyperinflation?

There isnt deflation here. Its a farce. There is liquidation of investments and forced liquidations to get cash. The printing presses are on full steam. This is temporary.

reply to post by mybigunit


What do you mean by "The printing presses are on full steam"? I thought they had to loan money into existence, they couldn't just print more...who's borrowing from us at the moment? And wouldn't it be impossible to hide? I mean, could you secretly print money?

I'm asking 'cuz i'm interested...just trying to figure this all out a bit.

reply to post by Vault-D




it isn't exactly 'deflation'...it is more like asset 'devaluation'...
in fact the USD is now (finally) undergoing a 'deflation' which is more correctly viewed as a 'devaluation'.

be careful of the tricksters, they will spin you around with their terminology ~which is crafted to BS the populace~ and you will be convinced that the economy is not heading towards depression nor is the U$D headed for hyper-inflation

In addition to buying longer-term treasuries, agency debt, commercial paper, (private securities ie, stocks?)...the Fed stated that they are committed holding the target rate near zero for a prolonged period of time. The hope here is to to stimulate economic activity by artificially lowering (smothering) long term interest rates (wise to meddle with mother nature?)

With no reliable benchmark for quantitative easing, the risk is...out-of-control inflation. Dicey experiment!

Anyone else find it an amazing coincidence that BB is now employing all of the anti-deflationary weapons he theorized in essays...years before his appointment to the Fed chair

Originally posted by yellowcard
....gold nuts are ignoring the fact that the ECB is dumping gold faster than the U.S. drops bombs.

I'd really be interested in seeing that rumour substantiated YC.

1 July 2008 - The ECB’s gold sales

On 30 June, the European Central Bank (ECB) has completed gold sales amounting to 30 tonnes of gold. These sales are in full conformity with the Central Banks’ Gold Agreement, dated 27 September 2004, of which the ECB is a signatory. Together with the gold sales of 42 tons, which were completed on 30 November 2007, the ECB has thus sold 72 tons of gold in the fourth year of the agreement, which started on 27 September 2007 and ends on 26 September 2008. It is not the ECB’s intention to sell more gold in the current year of the agreement.

ECB Webpage

The window for 2008 Central Bank Gold sales closed the week ending Sept 26. Under the terms of the Central Bank Gold Agreement, CB Gold sales can resume for 2009 allotment, but none have been reported. Collectively, signatories have failed to "dump" the 500 tonne annual allotment for a couple years running now...preferring to hold-on to it as 'official reserves'.

All CB's hold Gold as 'reserves'. Why? To lend an aire of legitimacy to their fiat currencies in the event of emergency. The US Fed reportedly holds over 70% of it's 'official reserves' in the form of Gold. With where they intend to take the Dollar....I hope it's all there

Originally posted by Vault-D
And if i'm not mistaken, in a deflationary period there's even *less* reason to invest in commodities like gold, correct? Isn't gold a hedge against hyperinflation?

It's more complicated than that, unfortunately.

Here's the deal. We have a tremendous amount of financial/economic vehicles, many of which have only cropped up in full force in the past decade or two.
We haven't experienced a true deflationary period in the United States since the WWII era. The recessions since then haven't been deflationary in nature.
What this boils down to is that we don't really know how a deflationary recession will pan out; we can't compare this to prior events with perfect accuracy because the financial vehicles such as CDS, CDOs, MBS and other alphabet-soup things we hear about, along with things like hedge funds, were simply not in existence at all or in nearly the same numbers as they are today.

So. In general terms judging by past deflationary periods, commodities' prices such as oil and gold decrease. In current terms....they may go down, they may not.
What one should have been following are the US bond/note yields; the bond market gives a very good indication of where we are in an inflationary/deflationary sense. Unfortunately we've lost the ability to trend via bond yields thanks to the bit in today's announcement that no one's talking about.
"The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities."
With the Fed buying on the long end (10yr, 30yr most likely), yields on those bonds will be depressed which will muddle the data. The short end (3yr is what I've been watching mostly) are hopefully still untainted. When those yields start to skyrocket, that's when the real money is starting to price in high (or, god forbid, hyper) inflation.

Don't buy their bull that the Fed is "thinking about" it, by the way. They're almost certainly doing it already.

Originally posted by mybigunit
There isnt deflation here. Its a farce. There is liquidation of investments and forced liquidations to get cash. The printing presses are on full steam. This is temporary.

The proverbial printing presses are on, but it's the equivalent of tinkling on an inferno. Money has been destroyed in massive quantities, notably via credit reduction/collapse but also via equities' loss in perceived value. The money being injected is being hoarded AND is being used to offset losses in equities. What isn't canceled out in losses is stacking up at the Fed.

I think you're only looking at one small part of deflation. There isn't a single type of deflation, so there can't be a single type of reaction to it.

Temporary? Sure, but define temporary. If we're looking at deflation/disinflation for 5 years (as the bond markets have been pricing), that's not as temporary as COMEX holders would like.

Originally posted by Vault-D
reply to post by mybigunit

 

What do you mean by "The printing presses are on full steam"? I thought they had to loan money into existence, they couldn't just print more...who's borrowing from us at the moment? And wouldn't it be impossible to hide? I mean, could you secretly print money?

I'm asking 'cuz i'm interested...just trying to figure this all out a bit.

i think these videos may help you, they do a pretty good job of explaining how it works.

fast forward the first 4 minutes of the first one, its just an intro..

www.youtube.com...
www.youtube.com...
www.youtube.com...