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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

#111

Post by kmonsen »

fourstar wrote: post #66
postingawayonhn wrote: post #56

Earlier quoted context omitted.

> 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'.

Came here to reply with the same thing. Not sure who is downvoting me but my guess is people who weren't around back in '08 or are significantly out of touch with US economic policy (or general econ policy, that is). If you've downvoted me then you probably need to watch this: https://www.youtube.com/watch?v=PHe0bXAIuk0 . This is a wet band-aid.

We really need band-aids now, like in 2008. The problem is not the band-aid now, the problem is that we did not rip it off in the good times but instead spent all the money in irresponsible tax cuts for people that didn't need them.

Re: Federal Reserve slashes interest rates to zero

#112

Post by sarah180 »

coretx wrote: post #69

The EU is printing more EUR, helping everyone. The USA is lowering the interest, helping the ultra rich.

This is effectively how you print money in a modern economy. They're giving banks access to a lot more cash and have reduced reserve requirements to 0%, meaning that banks can loan new money without limitation and without fear that they'll be able to borrow to cover those loans.

Most money is not actually on paper, so the amount you print is not the point.

Re: Federal Reserve slashes interest rates to zero

#113

Post by raincom »

taiwanboy wrote: post #94
AznHisoka wrote: post #89

Earlier quoted context omitted.

What if stocks dropping was mostly due to people selling their holdings?

With interest rate at near 0 percent and inflation at 2.3%, people will come back to stocks sooner rather than later

You are ignoring bond markets, which is playing a huge factor in getting away from stocks.

Re: Federal Reserve slashes interest rates to zero

#114

Post by bluGill »

toomuchtodo wrote: post #93
mindcrash wrote: post #82

Earlier quoted context omitted.

>the financial system is actually fine. Banks are well capitalised and stable. No they are not. Most big European banks are technically bankrupt. Most big American banks are technically bankrupt too. The only reason people in general do not know about this is because they used a lot of financial tricks to make it look like they are healthy. In fact, Deutsche Bank very likely had to announce that they are bankrupt thi…

https://www.federalreserve.gov/newsevents/pressreleases/mone... > In light of the shift to an ample reserves regime, the Board has reduced reserve requirement ratios to zero percent effective on March 26, the beginning of the next reserve maintenance period. This action eliminates reserve requirements for thousands of depository institutions and will help to support lending to households and businesses. Interesting t…

If a bank had reserves before now is the time to use them. In a few months they need to rebuild those reserves for whatever is next.

Re: Federal Reserve slashes interest rates to zero

#115

Post by cryptica »

dcftoapv wrote: post #57
onlyrealcuzzo wrote: post #51

Earlier quoted context omitted.

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.

The Fed should just hire all citizens in the country as employees. That would be a more efficient way to maximize employment.

Re: Federal Reserve slashes interest rates to zero

#116

Post by kds3 »

dcftoapv wrote: post #57
onlyrealcuzzo wrote: post #51

Earlier quoted context omitted.

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.

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

The thing is you can't avoid the bust part, you can only soften it in a way it is not harmful for (some) people.

Re: Federal Reserve slashes interest rates to zero

#117

Post by appleiigs »

csense wrote: post #68
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…

Does anyone here understand how negative interest rates would work? Why would anyone buy a negative-rate treasury bond instead of just hanging on to their cash?

You got some really weird replies. As interest rates go down, people move their money away from treasuries into other assets such as stocks, real estate, etc. Stocks and real estate at least can provide a return, therefore, it's preferred over negative treasuries and cash.

Negative rate treasuries can be preferred over cash because it's owed by the US gov't which has less credit risk than having your cash sitting at some savings & loans credit union in small town in Utah.

Edit: for the other replies: cash in this context does not mean physical paper money.

Re: Federal Reserve slashes interest rates to zero

#118

Post by sarah180 »

spodek wrote: post #53

In the context of Covid, wouldn't lowering economic activity help keep people home? It seems more than "just" saving lives. Purely economically, wouldn't a crashed health care system hurt the economy for a longer term?

A depression can kill a lot more people than COVID-19. This is why the state of California just told young, healthy people to continue to visit restaurants for now as long as tables are six feet apart.

This is not just an idea from thin air: they're doing lots of projections on models of what is actually going to do more harm.

Think of it this way: if the economy shrinks by 30%, that means we have to spend 30% less on everything. That's 30% less funding for wellness, hospitals & emergency services. 30% less that people spend on self-care like gym memberships. 30% less on gasoline to get to outdoor activities. If your food budget drops by 30%, there's a good chance you're going to eat less healthy foods. If people are going out 30% less often, you will see increases in both physical and mental illness ,as we know that social contact improves health.

This is why the Twitter meme of "everybody panic and go home and stay there for three weeks" may actually do a lot more harm than good even if it helps slow the spread of COVID-19.

Unless you think your state and county leadership is incompetent, follow their advice, as they are best informed about the local conditions.

Re: Federal Reserve slashes interest rates to zero

#119

Post by mNovak »

taiwanboy wrote: post #79
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.

Game over is an exaggeration. There’s 3.4 trillion sideline cash. China’s economy collapsed 80-90% in the last month and will take months to recover, on top of exploding debts. Japan and Germany was in recession before coronavirus hit. On the other hand, US was growing a steady 2% and had record low unemployment before this. If US can flatten the curve, with only ~3000 cases thus far, US will recover quickly and come…

Do you have a source for 80-90% collapse in China? That sounds way high.

Also 3000 confirmed cases does not mean 3000 actual infections. Depending on the model, the expected number is orders of magnitude higher.

Re: Federal Reserve slashes interest rates to zero

#120

Post by SubiculumCode »

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…

Helicopter drops are needed, imo
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