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Federal Reserve slashes interest rates to zero

washingtonpost.com

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Re: Federal Reserve slashes interest rates to zero

#51

Post by onlyrealcuzzo »

inferiorhuman wrote: post #43
aazaa wrote: post #15

The Fed can, and will do much, much more. The signal here should be read as "whatever it takes to avoid a depression." Among other steps, this is likely to mean: - Negative-yielding long-term treasuries - Direct purchase of stocks or ETFs, which would require congressional approval. Expect the discussions to start soon. The steps already taken and the ones to be taken will create financial manipulation on a scale nev…

If the Fed loses this fight, game over. This isn't the Fed's fight. Monetary policy won't fix this.

A lot of people seem to think the Fed's job evolved to include preventing recessions.

I guess the Fed isn't accountable to the US public, so their job can be whatever they want it to be?

Re: Federal Reserve slashes interest rates to zero

#52

Post by ajross »

aazaa wrote: post #15

The Fed can, and will do much, much more. The signal here should be read as "whatever it takes to avoid a depression." Among other steps, this is likely to mean: - Negative-yielding long-term treasuries - Direct purchase of stocks or ETFs, which would require congressional approval. Expect the discussions to start soon. The steps already taken and the ones to be taken will create financial manipulation on a scale nev…

> whatever it takes to avoid a depression

Does the Federal Reserve Bank do vaccines, now? This isn't a financial crisis. Money won't fix it. People aren't transacting in big chunks of the economy because they're immobilized by a plague.

Now... certainly once the virus is under control, economic recovery is going to depend on finance and liquidity, so it's not like the Fed has no role to play. But... it's not the Fed's fight to "lose". Until case counts are down and infection risk is negligible, we're looking at a depression regardless.

Re: Federal Reserve slashes interest rates to zero

#54

Post by imglorp »

michaelyoshika wrote: post #29
phkahler wrote: post #10

IMHO this is a really bad idea. Let's hope they raise them slowly this time, unlike 2007-8 when they went back up quickly and triggered mayhem.

Don't know why this is downvoted. Cutting interest only benefits the wall street in the next couple months. Basically this admin only knows two things: 1, Cut interest rate 2, Cut tax And it doesn't care if the world explodes after they step down.

Most republican administrations have displayed that "get mine and get out" behavior--causing recessions--since Teddy Roosevelt.

Re: Federal Reserve slashes interest rates to zero

#55

Post by ineedasername »

inferiorhuman wrote: post #43
aazaa wrote: post #15

The Fed can, and will do much, much more. The signal here should be read as "whatever it takes to avoid a depression." Among other steps, this is likely to mean: - Negative-yielding long-term treasuries - Direct purchase of stocks or ETFs, which would require congressional approval. Expect the discussions to start soon. The steps already taken and the ones to be taken will create financial manipulation on a scale nev…

If the Fed loses this fight, game over. This isn't the Fed's fight. Monetary policy won't fix this.

Precisely. This isn't an issue driven by obscure and multi-layers investment vehicles that can't survive when stressed. This is a decrease in the market driven by actual significantly reduced consumption and demand for a wide variety of services. The Fed keeping things liquid is important, as are things like low interest loans to small businesses. But it doesn't matter how cheap your credit is if you don't actually have any revenue coming in. Monetary policy will (hopefully) help keep the economy from complete disaster while the underlying issue is resolved, but that's the most it can do.

Re: Federal Reserve slashes interest rates to zero

#56

Post by postingawayonhn »

adventured wrote: post #45
fourstar wrote: post #33

Earlier quoted context omitted.

> If the Fed loses this fight, game over. They've already lost it. It's clear they're scrambling. You can't print your way out of this is the lesson we KNEW from '08.

> You can't print your way out of this is the lesson we KNEW from '08. Printing our way out of 2008-2010 is exactly what we did that worked, and it's what Europe mostly didn't do and their results were terrible by comparison (leading to another bad recession a few years later, after which the ECB finally learned a lesson; and finally after that, Europe began to properly recover, including countries hardest hit like S…

> Printing our way out of 2008-2010 is exactly what we did that worked

It was always just a band-aid. The reason the Fed has had to take interest rates so low now is that they were unable to raise them during the lastest 'boom'.

Re: Federal Reserve slashes interest rates to zero

#57

Post by dcftoapv »

onlyrealcuzzo wrote: post #51
inferiorhuman wrote: post #43

Earlier quoted context omitted.

If the Fed loses this fight, game over. This isn't the Fed's fight. Monetary policy won't fix this.

A lot of people seem to think the Fed's job evolved to include preventing recessions. I guess the Fed isn't accountable to the US public, so their job can be whatever they want it to be?

The feds mandate is to maximize employment, stabilize prices, and moderate long-term interest rates.

A big part of that is trying to avoid the 'bust' part of a boom-bust cycle.

As evidenced by your post, the fed should not be accountable to the public because the public cannot be expected to spend anytime trying to understand what they do and their methods of action.

Re: Federal Reserve slashes interest rates to zero

#58

Post by simonh »

inferiorhuman wrote: post #43
aazaa wrote: post #15

The Fed can, and will do much, much more. The signal here should be read as "whatever it takes to avoid a depression." Among other steps, this is likely to mean: - Negative-yielding long-term treasuries - Direct purchase of stocks or ETFs, which would require congressional approval. Expect the discussions to start soon. The steps already taken and the ones to be taken will create financial manipulation on a scale nev…

If the Fed loses this fight, game over. This isn't the Fed's fight. Monetary policy won't fix this.

This is correct, the financial system is actually fine. Banks are well capitalised and stable. The problems are cash flow for businesses, incomes for low income and hourly wage earners, and health care for huge swathes of Americans.

The fed has an important role to play of course, but they’re really a sideshow this time around.

Re: Federal Reserve slashes interest rates to zero

#59

Post by taiwanboy »

aazaa wrote: post #15

The Fed can, and will do much, much more. The signal here should be read as "whatever it takes to avoid a depression." Among other steps, this is likely to mean: - Negative-yielding long-term treasuries - Direct purchase of stocks or ETFs, which would require congressional approval. Expect the discussions to start soon. The steps already taken and the ones to be taken will create financial manipulation on a scale nev…

The government can simply ban shorts, much like 2008, and what other European stock markets have done already. That would kill the shorts dead in its tracks. Then the stock market would stabilize, in time for businesses to stabilize and hopefully by summer everything will be recovery focused.

Re: Federal Reserve slashes interest rates to zero

#60

Post by adventured »

postingawayonhn wrote: post #56
adventured wrote: post #45

Earlier quoted context omitted.

> You can't print your way out of this is the lesson we KNEW from '08. Printing our way out of 2008-2010 is exactly what we did that worked, and it's what Europe mostly didn't do and their results were terrible by comparison (leading to another bad recession a few years later, after which the ECB finally learned a lesson; and finally after that, Europe began to properly recover, including countries hardest hit like S…

> Printing our way out of 2008-2010 is exactly what we did that worked It was always just a band-aid. The reason the Fed has had to take interest rates so low now is that they were unable to raise them during the lastest 'boom'.

It'll continue to be a band-aid, of course. Band-aids are useful.

It's the Japanification of the US economy, including a similar Federal debt problem (which is the single biggest reason the Fed can never raise rates back to a normal level again).

Japan still has a highly functioning country and functioning economy (one of the wealthiest and most productive on earth), even though their central bank policies and debt situation are an enormous mess.

The US has a lot of household wealth (~$100-$110 trillion) that the Fed can debase on a perpetual basis, as a never-ending band-aid. Then there is all the other dollar based wealth around the world. They can run a never-ending $80 billion per month QE program and it'll barely scratch the massive US asset base (which over time, averaged, may well outgrow a trillion dollar per year debasement). Ideally you want to see the US Government bring its irresponsible fiscal situation under control, sooner than later, so that approach doesn't have to go on for 30 or 50 years (but nobody is going to hold their breath for that). The counter is to point out that foreign actors will pull their confidence in the USD during this process (increasing the real cost for the Fed to keep doing it), whether after 10, 20, 50 years - and that may well happen, but it's impossible to forecast when. This is especially true given the currency competitors are all a mess as well, with China overloaded with debt, Japan in far worse shape than the US, and the Eurozone with no growth and their own miscellaneous debt & economic problems.

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