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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

#131

Post by barry-cotter »

dcftoapv wrote: post #85
dnautics wrote: post #72

Earlier quoted context omitted.

Are you optimistic about the wealth transfer implications of their activity?

Look, I don't want to be alarmist, but the worst outcome here is not '08. It's the 1930s. This has caused material demand and supply side shocks that we haven't seen in my lifetime or my parents' lifetime. I'm likely on the younger side of the hacker news demographic and I still believe that this is the right action to take at this moment. We might be stuck paying it off for awhile, but I would rather deal with an in…

> Look, I don't want to be alarmist, but the worst outcome here is not '08. It's the 1930s.

This seems unlikely. The Fed does not seem to be on track to contract the money supply by 30% causing a wave of bank collapses, and leading to a trade war that means international trade collapses this time. They may not pursue optimal policy but every macroeconomist knows that that would be a bad idea. The joys of limited data are a better appreciation of history than microeconomics.

Re: Federal Reserve slashes interest rates to zero

#132

Post by perl4ever »

nightski wrote: post #47
perl4ever wrote: post #41

Earlier quoted context omitted.

What do you think is the difference between saving and investing??

Saving is preservation of capital whereas investing is growing capital. At least that is my take.

Ok, but parent is lamenting that "saving" pays less than "investing". You're saying that's implied by the (or your) definition so it seems like it would go without saying.

Re: Federal Reserve slashes interest rates to zero

#133

Post by vkou »

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.

The fed is pushing on a rope. Any upcoming depression will be driven by collapse in demand, not supply. Slashing interest rates won't do anything to prop spending when consumers are sitting at home, not working, and not buying anything.

All this is, is an attempt to boost asset prices, to bailout investors.

Re: Federal Reserve slashes interest rates to zero

#134

Post by aksss »

deelowe wrote: post #91
taiwanboy wrote: post #79

Earlier quoted context omitted.

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…

What are we doing to flatten the curve? I keep seeing the us getting compared to Italy.

Well systemically remember Americans are out-of-the-box more “socially-distanced” than Italians. We all commute one person to a car, we have an outsized sense of personal space. We are less community oriented by and large.

Re: Federal Reserve slashes interest rates to zero

#135

Post by dnautics »

barry-cotter wrote: post #131
dcftoapv wrote: post #85

Earlier quoted context omitted.

Look, I don't want to be alarmist, but the worst outcome here is not '08. It's the 1930s. This has caused material demand and supply side shocks that we haven't seen in my lifetime or my parents' lifetime. I'm likely on the younger side of the hacker news demographic and I still believe that this is the right action to take at this moment. We might be stuck paying it off for awhile, but I would rather deal with an in…

> Look, I don't want to be alarmist, but the worst outcome here is not '08. It's the 1930s. This seems unlikely. The Fed does not seem to be on track to contract the money supply by 30% causing a wave of bank collapses, and leading to a trade war that means international trade collapses this time. They may not pursue optimal policy but every macroeconomist knows that that would be a bad idea. The joys of limited data…

The policy understanding in 1933 (still early in the depression) was... Well... Primitive, to say the least.

Though sometimes I wonder exactly how much policy makers sophistication has evolved

https://youtu.be/JUvm9UgJBtg

Re: Federal Reserve slashes interest rates to zero

#136

Post by vkou »

grecy wrote: post #81
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 Have a look at any country in history that printed it's way out of trouble, and see how that worked out for them in the longer term. Zimbabwe is a good recent one to look at.

> Have a look at any country in history that printed it's way out of trouble

Yes, as the poster to whom you responded to said. The United States, for some definitions of printing.

It's the kind of thing that you can do, when you control the world's reserve currency.

Re: Federal Reserve slashes interest rates to zero

#137

Post by toomuchtodo »

bluGill wrote: post #114
toomuchtodo wrote: post #93

Earlier quoted context omitted.

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.

If they didn't use them before, why would they use them now? Pushing the string. Can't fix fiscal policy issues with monetary policy. Helicopter money is all that's left, but that requires a functioning legislature, so we’ve already lost.

Re: Federal Reserve slashes interest rates to zero

#138

Post by chance_state »

michaelyoshika wrote: post #106
yalogin wrote: post #92

Why is this warranted yet? This is a terrible that will only signal that the fed is panicking and nothing else. There are no indications that the supply chain is disrupted or that the economy is sputtering. It will happen at some point in the next few weeks with or without the infusion and rate cuts now. These things are much better done when warranted rather than now. As of now it’s only a humanitarian crisis and on…

Earlier this weekend Trump said he could have fired Powell but choose not too. Imagine you were Powell, what would you do?

What you felt was right, rather than self-preserving, perhaps?

Re: Federal Reserve slashes interest rates to zero

#139

Post by lbotos »

jkraker wrote: post #14
colinbartlett wrote: post #8

My "high interest" savings accounts already took a recent haircut and this will accelerate that. I understand that's the idea: make investing attractive and savings unattractive. But for a regular joe like me, this is exactly the time I want to be saving more so it stings.

I moved some of my high yield savings account into a 12 month CD recently to maintain a more tolerable interest rate for the next 12 months while the savings account interest rate inevitably tanks. That means I can't touch it for 12 months if I want the interest, but I was careful with the amount I put in the CD so that I will most likely not have to touch it. This should in no way be construed to be advice because I…

you can also get 4-5 smaller CDs (whatever smaller means for you) so if you did need some funds, you wouldn't have to lose all of the interest.

Re: Federal Reserve slashes interest rates to zero

#140

Post by Goladus »

deelowe wrote: post #104
taiwanboy wrote: post #99

Earlier quoted context omitted.

Closing down schools, banning large gatherings, setting up drive thru testing, ramping up test kits next week, letting employees to work from home, closing borders to China and Europe (25k cases), etc

Does that stuff help? Did Italy do that? Im seeing tons of people on IG using this time as a means to take vacations.

Does that stuff help?

Yes, if practiced as intended, which there is no guarantee.

Did Italy do that?

Perhaps not as quickly as they should have. The rest of the world is learning from Italy's experience (they should have been paying closer attention to China, but that's another story)

Another thing to realize is that these numbers you are seeing are WITH CONTROLS. Sure, "only" 3,000 Chinese have died. Maybe it's more than that, it's hard to trust Chinese numbers. But even at 2x or 3x, that's far cry from the millions it could have been, had China not both imposed extreme controls to limit the spread of the disease AND allocated emergency resources to healthcare.

Some models show realistic scenarios where 5 million Americans die within a year, if the virus is allowed to spread at its maximum rate.

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