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Do you think the Fed has ran out of options to aid economic recovery? - mrchitrade - 01-31-2013 06:09 PM
reduce rates to zero?
- mrzwink - 01-31-2013 06:17 PM
its actually possible to reduce rates lower than zero. Japan had a short period in 1999 where it did.
- muncie birder - 01-31-2013 06:17 PM
In my opinion it was some of the actions of the Fed that caused the current economic problems during the reign of Greenspan. One of the current problems is that people borrowed more money than they could pay back. Now the Fed solution is to reduce interest rates to confiscatory levels for lenders in the hopes that people will borrow more money that they probably will not pay back. Makes sense to me.
- MarcThyme - 01-31-2013 06:17 PM
No I don't, but I do now KNOW that you do not read/watch the News, since there have been dozens of stories worldwide over the last couple of weeks outlining what the Feds "other" options actually are, and what they may (or may not) do!
Silly goose!
- itsjunglepat - 01-31-2013 06:17 PM
They can still sell me a nice house at a very reduced price.
- Net Advisorâ„¢ - 01-31-2013 06:17 PM
I generally always believe that there are options.
The challenge is do we know what the best options are given a particular scenario?
The current FED target rate (FFR) is 0 to 0.25% (1/4 point).
Fed's latest action is to buy U.S. Treasuries with maturing mortgage debt
http://twitter.com/NetAdvisor/status/20815779480
Basically what this means is that the FED will be sucking up the slack that the bond market, China or other buyers of U.S. debt won't purchase. This allows the U.S. gov to keep their reckless spending policies in place.
The problem with this strategy is that if the economy does not grow or grow fast enough, if we face inflation in the future, tax payers could end up holding the bag on the FED's losses.
If we (USA) face higher taxes in the future, which the Obama Administration has so far guaranteed starting in 2011 with $1 trillion in renewed tax increases. This will not affect just the so called "wealthy," it will affect everyone who has a job.
Raising taxes and increased gov sponsored social programs was also the policies by the U.S. gov in the Great Depression. The result of that is that we stayed in Depression for 10 more years and it took World War II to get us out of that.
Not suggesting a WWIII to get us out of this recession, but spending, increasing debt, and raising taxes is the wrong strategy.
I have argued that a better strategy to gov spending is to lower taxes for all. This will allow consumers to use THEIR own money to handle their own situation better. Whether consumers decide to spend some if it, thus helping the economy, or reduce their debt load (good idea), and increase their savings for the future are better strategies.
I have argued back and since Nov 2007 that if the consumer is not stable the economy will not be stable.
Reckless and record Gov spending is creating a bigger future problem that they have no clue on how to manage that crisis.
The FED seems to become more political in nature (following the economic wishes of politicians in Washington), and not independent as it once was, or is supposed to be.
Articles:
"Economic Crack. Risk to The U.S. Economy"
http://netadvisor.wordpress.com/2010/05/17/economic-crack-risk-to-the-us-economy/
"The Biggest Risk to U.S. Recovery is the U.S. Government"
http://netadvisor.wordpress.com/2010/05/18/biggest-risk-to-u-s-recovery-is-the-u-s-government/
Additional Y!A Q&A References - notice the dates (how far back) of the posts:
"What happened leading up to the stock market crash of 1929?"
http://answers.yahoo.com/question/index?qid=20090706074932AAtuGAc&r=w#BaN_M2D0AnhGUqjJm65y
"Interest dropping to .5% ?"
http://answers.yahoo.com/question/index;_ylt=ArzctodP4LXA.R2R2mGw24Dty6IX;_ylv=3?qid=20081216102854AA75Sg7&show=7#profile-info-yrKtRAuXaa
How long is this recession going to last? (12-2008)
http://answers.yahoo.com/question/index;_ylt=Av5rAqesc5_V8sQkpxZHwIDty6IX;_ylv=3?qid=20081118063516AAKit7o&show=7#profile-info-z15RhXfjaa
"Does anyone think the economy might get better in 2009?"
http://answers.yahoo.com/question/index;_ylt=AhwEjuDhxqFvzKM89FlDsQzsy6IX;_ylv=3?qid=20090113195452AAvOqY6
"If government spending it is good for the economy?"
http://answers.yahoo.com/question/index;_ylt=AnRW5LplMN21L0Or8wiJYtzty6IX;_ylv=3?qid=20090206084755AAlOS9v&show=7#profile-info-krAlopvsaa
"How is this "Stimulus" bill going to stimulate the economy when all it does is help programs grow in size?"
http://answers.yahoo.com/question/index;_ylt=AldA.NVVtFO3oQG3yuctb43ty6IX;_ylv=3?qid=20090129122006AAVDtHS&show=7#profile-info-x97ktCqwaa