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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

#161

Post by AnthonyMouse »

BenoitEssiambre wrote: post #126
Anon84 wrote: post #67

Earlier quoted context omitted.

What does game over mean in this context?

Game over happens when, fiat money seems to have, on a risk adjusted, liquidity adjusted basis, a better return and better appeal than holding existing real private assets, therefore a process starts where people, businesses and banks try to hoard government paper all at the same time instead of holding private assets. Demand shifts so far towards government paper and away from private assets that the supply of the l…

> Game over happens when, fiat money seems to have, on a risk adjusted, liquidity adjusted basis, a better return and better appeal than holding existing real private assets, therefore a process starts where people, businesses and banks try to hoard government paper all at the same time instead of holding private assets.

This is what happened in the 1930s. But as you say, counteracting it is as easy as printing money. Which normally has the disadvantage of causing inflation (this is what they were excessively afraid of in the 1930s), but when there are existing deflationary forces in effect, all it does is even things out.

The real question is, what happens to the money they print? Buying treasuries with it is the usual option, which isn't a total disaster (it pushes investment back into stocks by lowering the yield on bonds), but a better option right now might be paying out the new money as a UBI.

That would serve two purposes at once. One, you fight the deflationary effect, and two, you help people out whose businesses are suffering, both by giving the proprietors a UBI and by giving their customers one as well so they then have some more money to patronize businesses with. So instead of propping up stock prices artificially, you maintain their value organically by strengthening consumer demand.

This also provides a nice answer to the question, what do we do once interest rates are already zero? At that point we can use any additional new money to fund a UBI instead of driving interest rates negative.

Re: Federal Reserve slashes interest rates to zero

#163

Post by snidane »

miohtama wrote: post #151
jfoutz wrote: post #145

Earlier quoted context omitted.

I'm sort of surprised they didn't try to push the issue from the bottom. give every tax filer some amount of money say, $200. A bonus for each dependent, say, $100. pulled numbers absolutely out of thin air. I thought the issue was money sloshing around at the bottom, a couple hundred bucks can be a big deal when you're out of work. Ah well, I'm sure the experts have it well in hand.

It's called helicopter money. Australia and Hong Kong already announced going down this route. https://en.m.wikipedia.org/wiki/Helicopter_money It is very last measure as in that point you are basically admitting that capitalism has failed.

> It is very last measure as in that point you are basically admitting that capitalism has failed.

1. it might be better to prevent a situation of people unable to pay rents and mortgages and have the entire banking system collapse on this enormous liquidity trap. That could mean end of capitalism for sure

2. from capitalist point of ciew, you can look at helicopter money as a dividend. Companies 'give out' money to shareholders and Alaska and Saudi Arabia give out oil money to citizens too.

Re: Federal Reserve slashes interest rates to zero

#164

Post by fourstar »

fourstar wrote: post #143
kmonsen wrote: post #111

Earlier quoted context omitted.

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.

No. We don't. We need more emphasis on value vs. growth. In what world is WeWork's valuation sustainable. Also who the hell is downvoting me? LOL. If you downvote, please comment here so we can debate. I'm dying to see you defend the bull market case (even sideways to slightly up which would be best case scenario).

> Alot of people think that CB's should always be on call to cover their bad bets…

I think more people would probably hope that central banks don't make bad bets anyway.

You know when you hear about Japan being this futuristic society? You go and visit and you feel like they are "ahead" and have things figured out?

Their economy is what our economy is going to look like. A short-medium term down and then long drawn out sideways market. Who knows when a recovery will be.

Good time to refinance.

Re: Federal Reserve slashes interest rates to zero

#165

Post by cinquemb »

fourstar wrote: post #164
fourstar wrote: post #143

Earlier quoted context omitted.

No. We don't. We need more emphasis on value vs. growth. In what world is WeWork's valuation sustainable. Also who the hell is downvoting me? LOL. If you downvote, please comment here so we can debate. I'm dying to see you defend the bull market case (even sideways to slightly up which would be best case scenario).

> Alot of people think that CB's should always be on call to cover their bad bets… I think more people would probably hope that central banks don't make bad bets anyway. You know when you hear about Japan being this futuristic society? You go and visit and you feel like they are "ahead" and have things figured out? Their economy is what our economy is going to look like. A short-medium term down and then long drawn o…

> You know when you hear about Japan being this futuristic society? You go and visit and you feel like they are "ahead" and have things figured out?

Was there for a couple weeks in dec '18… kyoto, fujisan, hiroshima, tokyo… I didn't think this at all unless the "ahead" was meant in jest

> Their economy is what our economy is going to look like. A short-medium term down and then long drawn out sideways market. Who knows when a recovery will be.

So people can look forward to a 30 year bear flag? lol

> Good time to refinance.

Yeah, if you aren't already underwater facing no bids when trying to get liquid.

Re: Federal Reserve slashes interest rates to zero

#166

Post by chrispeel »

miohtama wrote: post #151
jfoutz wrote: post #145

Earlier quoted context omitted.

I'm sort of surprised they didn't try to push the issue from the bottom. give every tax filer some amount of money say, $200. A bonus for each dependent, say, $100. pulled numbers absolutely out of thin air. I thought the issue was money sloshing around at the bottom, a couple hundred bucks can be a big deal when you're out of work. Ah well, I'm sure the experts have it well in hand.

It's called helicopter money. Australia and Hong Kong already announced going down this route. https://en.m.wikipedia.org/wiki/Helicopter_money It is very last measure as in that point you are basically admitting that capitalism has failed.

Maybe in some sense this would be admitting that capitalism failed, but not in some bad sense. Any monetary policy at all is acknowledging that we want a closed-loop to keep the economy stable; this closed loop is an acknowledgement that anarcho-capitalism (without any feedback loop) is not stable.

Helicopter money seems reasonable to me. Depending on how it's delivered, it could act like a temporary UBI.

Re: Federal Reserve slashes interest rates to zero

#167

Post by wffurr »

perl4ever wrote: post #132
nightski wrote: post #47

Earlier quoted context omitted.

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.

It's not that saving pays less than investing; it's that it's paying almost nothing right now. Savings account interest rates are terrible, which is very frustrating if you want to have some cash reserves.

I'm not going to put my 6 month emergency fund or the downpayment for my future house into stocks and ETFs; they're too risky. It hurts to keep it in a savings account paying less than 1% though, which is the alternative.

Re: Federal Reserve slashes interest rates to zero

#168

Post by llampx »

Supermancho wrote: post #146
mNovak wrote: post #119

Earlier quoted context omitted.

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.

> Also 3000 confirmed cases does not mean 3000 actual infections. That's exactly what it means. 3000 cases of positively identified infections in individuals, if you want to get more wordy. Some of those have recovered, some have died. Still the number is over that today.

Technically it means minimum 3000 cases, probably more .

Re: Federal Reserve slashes interest rates to zero

#169

Post by ryder9 »

aksss wrote: post #150
imglorp wrote: post #54

Earlier quoted context omitted.

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

Well Clinton did preside over the dot com boom, leaving Bush to clean that up. He was the first democrat to be president since Carter. Not sure your thesis is very strong there as it depends upon an arbitrary duration, a nebulous criteria and an implication that democrat admins have behaved differently (based on same nebulous criteria). In reality, policies of presidents can be very loosely coupled to outcomes during…

Agreed, Clinton started the "third way" part of the Democratic Party; now known as the neoliberals.

Re: Federal Reserve slashes interest rates to zero

#170

Post by battery_cowboy »

perl4ever wrote: post #41
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.

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

Saving is for the proles, investing is for the oligarchs.
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