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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

#201

Post by toomuchtodo »

lbotos wrote: post #190
toomuchtodo wrote: post #152

Earlier quoted context omitted.

Allowing banks to draw down their reserves in their entirety isn’t going to change their behavior is my point. You need something like the US Gov’s SBA loan program or similar, to lend directly to businesses that are in jeopardy of default or failure. This is beyond the risk profile of traditional retail bank lending (although you’re probably near junk bond or hedge fund territory; at this scale though, those venues…

> Allowing banks to draw down their reserves in their entirety isn’t going to change their behavior is my point. If you are a bank in fractional reserve banking, who had a 10% capital requirement that is now lifted, you just got 10% more money to use to make money when it is getting increasingly hard for everyone to make money. And you think banks are gonna say, "nah, we wanna stay safe, we'll just sit on our hands"?…

I work in financial services (although that doesn’t mean you should trust my opinion any more than you otherwise might; I also do not work at a bank). I am absolutely telling you, based on my research, banks will sit on that cash and not lend it out in an appreciable amount. Did banks lend more in negative interest rate policy environments? It does not appear so based on reports from the very central banks who put those policies into place [1].

Banks want (mostly) safe returns. “Borrow at 3, lend at 6, at the golf course by 3”, as the saying goes. You need action by an institution that prioritizes rapid injections of cash to accelerate monetary velocity over conservative lending practices, and where saving the economy (and we are clearly at the precipice as indicated by how fast the Fed is moving) takes precedence over appeasing shareholders.

Disclaimer: My opinions are my own, and in no way, shape, or form that of any employer past, present, or future.

[1] https://www.pnc.com/insights/corporate-institutional/gain-ma...

Re: Federal Reserve slashes interest rates to zero

#202

Post by amiga_500 »

jfoutz wrote: post #145
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.

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.

> I'm sort of surprised they didn't try to push the issue from the bottom.

I think American finance would rather we end the world right now than give money directly to those who need it without Wall Street getting a cut.

Re: Federal Reserve slashes interest rates to zero

#203

Post by all_usernames »

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??

Your savings account will not drop 25% in one week unless you withdraw from it.

Re: Federal Reserve slashes interest rates to zero

#204

Post by amiga_500 »

gentleman11 wrote: post #174
miohtama wrote: post #151

Earlier quoted context omitted.

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.

Alberta did this with a surplus once. It was great. It doesn’t need to be a last resort at all

Do it every month. Call it UBI. And fund it from land tax not taxing labour, to encourage people to do actual useful things. Like manufacturing ventilators instead of playing the stock market or the land market.

Re: Federal Reserve slashes interest rates to zero

#205

Post by Lazare »

jganetsk wrote: post #32
superkuh wrote: post #16

Not only that but they've removed the reserve requirements entirely for "thousands" of banks. There are only ~4500 commercial banks in the USA total. So that's at least a good fraction of them. These banks can now create money out of nothing as much as they want.

Reserve requirements never really limited the ability of banks to create money. Canada hasn't had reserve requirements for >20 years. Neither does the UK, New Zealand, Australia, Sweden and Hong Kong. But all banks are indeed subject to capital requirements, and that does limit money creation Anyway, reserve requirements are generally not effective, including in the USA. Much has been written about this. Banks are us…

Very good answer!

Re: Federal Reserve slashes interest rates to zero

#206

Post by mike_d »

isignal wrote: post #189
sershe wrote: post #181

At this point, I'm actually starting to wonder. If we literally do nothing about the virus, or do the bare minimum, the worst case scenario based on the numbers I hear is 7.7b * 0.6 (total infections) * 0.02-0.03 (presumed mortality rate after the healthcare system collapses MINUS the rate if it doesn't), ~115m people are going to die worldwide. This appears to me to be the absolute worst case scenario given current…

There's a billion people in India and so far the mortality and spread rates there aren't similar to other countries. There is a theory that humid and warm places will not have these mortality rates (as validated by our common sense that summer time flu is less common). I don't think we have enough information about the virus to generalize to the whole world yet.

> There's a billion people in India and so far the mortality and spread rates there aren't similar to other countries

That is a lack of testing, same as what keeps US numbers depressed. India is severely lacking in cohesive response to viral outbreaks, to the point they are still dealing with a Swine Flu epidemic from 2009 (https://www.indiatoday.in/india/story/9-swine-flu-deaths-utt...)

> There is a theory that humid and warm places will not have these mortality rate

There is no scientific evidence to support this. The wild spread in the Middle East indicates heat may not be a factor.

Re: Federal Reserve slashes interest rates to zero

#207

Post by hn_throwaway_99 »

sershe wrote: post #181

At this point, I'm actually starting to wonder. If we literally do nothing about the virus, or do the bare minimum, the worst case scenario based on the numbers I hear is 7.7b * 0.6 (total infections) * 0.02-0.03 (presumed mortality rate after the healthcare system collapses MINUS the rate if it doesn't), ~115m people are going to die worldwide. This appears to me to be the absolute worst case scenario given current…

There is no option B like you seem to be implying. I guarantee if we did absolutely nothing, and the hospitals predictably became overwhelmed and people were dying without any access to care, and you'd also start to see significantly more cases of younger people dying, there would be mass panic and self quarantine in any case.

Re: Federal Reserve slashes interest rates to zero

#208

Post by bearzoo »

sershe wrote: post #181

At this point, I'm actually starting to wonder. If we literally do nothing about the virus, or do the bare minimum, the worst case scenario based on the numbers I hear is 7.7b * 0.6 (total infections) * 0.02-0.03 (presumed mortality rate after the healthcare system collapses MINUS the rate if it doesn't), ~115m people are going to die worldwide. This appears to me to be the absolute worst case scenario given current…

This is a bizarre analysis in my opinion. It’s not all about the mortality rate, it’s also about spending in general.

Re: Federal Reserve slashes interest rates to zero

#209

Post by ummonk »

sershe wrote: post #181

At this point, I'm actually starting to wonder. If we literally do nothing about the virus, or do the bare minimum, the worst case scenario based on the numbers I hear is 7.7b * 0.6 (total infections) * 0.02-0.03 (presumed mortality rate after the healthcare system collapses MINUS the rate if it doesn't), ~115m people are going to die worldwide. This appears to me to be the absolute worst case scenario given current…

> At this point everybody seems to admit it's beyond containment and the only thing we are trying to do is flatten the curve and prevent the deaths.

No. Only the UK is operating on that fatalist assumption. South Korea, China, Taiwan, and Singapore have all successfully contained it, and Italy is starting to do so as well.

Re: Federal Reserve slashes interest rates to zero

#210

Post by jfoutz »

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.

Capitalism fails all the time. I use the market for lemons as my default example [1]. It's ok. It the market works pretty well, and it's a good starting point for lots of situations. The problem is sometimes it doesn't. We know about a bunch of situations where it doesn't work so well, so we have regulations and such.

It's an extraordinary situation. I find it odd they're not implementing extraordinary responses. I guess, locally, we are taking extraordinary action with closing non-essential events and locations.

I guess I don't see much value in interest free loans for most people. I guess maybe personal loans? I don't quite see how I can get my hands on 10k interest free. We'll see.

[1] https://en.wikipedia.org/wiki/The_Market_for_Lemons

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