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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

#291

Post by ShinyObject »

sfj wrote: post #277
js2 wrote: post #240

SARS-CoV-2 doesn't care about monetary policy. Why not give money directly to the people who need it? They'll spend the money right away. I'm willing to sacrifice my 401(k) and retire on just SS if need be if my government is willing to help everyone worse off than me.

Curious why you need to government involved? Why not just take your money out of your 401(k) yourself? You'll suffer a penalty, but people are in need.

Because uncoordinated individual action is ineffective against large scale problems, which should be obvious right now.

Re: Federal Reserve slashes interest rates to zero

#292

Post by matt_the_bass »

tree3 wrote: post #279
matt_the_bass wrote: post #162

I think the issue is cash-flow. So the govt should do things to mitigate cash-flow. Such as pause rent/mortgage payments for 2 months for anyone that is out of work due to this.

As that does is shift the cash flow problems to someone else.

My point is that cash-flow is the issue. And most Americans pay a substantial portion of their income towards housing. What does cutting the fed interest rate by 1% do for “typical” Americans? I don’t think it reduces day to day stress which in turn causes more problems.

I don’t have a complete answer, but I feel like the answers that are given by the government are not the best answers and not the most effective use of funds.

Re: Federal Reserve slashes interest rates to zero

#293

Post by matt_the_bass »

shartshooter wrote: post #230

Stopping production for a significant period of time was the first gut punch covid is throwing. The second one seems to be landing on Europe and third will be North America. This means China will have a head start on getting supply up and running. If the ROW is at a standstill in production, China will fill that gap which could further displace a lot of production in the west. China getting containment in order didn’…

I think that may be plausible. But I also think that a lot of companies relying on Chinese manufacturing all suddenly saw they had all their manufacturing eggs in one basket.

I’m not suggesting that we should move manufacturing back to US, but we should diversify. I’m seeing that some of my suppliers have already moved to other Asian countries. I expect that diversification to continue.

Re: Federal Reserve slashes interest rates to zero

#294

Post by [deleted] »

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…

[deleted]

Re: Federal Reserve slashes interest rates to zero

#295

Post by sfj »

ShinyObject wrote: post #291
sfj wrote: post #277

Earlier quoted context omitted.

Curious why you need to government involved? Why not just take your money out of your 401(k) yourself? You'll suffer a penalty, but people are in need.

Because uncoordinated individual action is ineffective against large scale problems, which should be obvious right now.

If he gave his money to a few people in need, it would be effective for them, wouldn't it? And probably better spent then after going through the tangled mess of government bureaucracy. What more could you hope for?

Re: Federal Reserve slashes interest rates to zero

#296

Post by simonh »

toomuchtodo wrote: post #137
bluGill wrote: post #114

Earlier quoted context omitted.

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.

We weren't dealing with a crisis before. Now we are.

You're quite correct that this is a fiscal and not monetary crisis, as I commented up-thread, but that doesn't mean it won't have monetary impact and implications. For example as I pointed out the primary problem is cash flow for companies and households, but that also means they may not be able to pay back bank loans when they otherwise would and that will impact bank balance sheets. It's a secondary issue, but still a real issue that banks need to have the flexibility to absorb.

Re: Federal Reserve slashes interest rates to zero

#297

Post by throwanem »

sershe wrote: post #267
throwanem wrote: post #193

Earlier quoted context omitted.

This makes sense if you assume that tens of millions of people suddenly dying will have no effect on the economies in which they do so. That's quite an assumption!

That is true. Although, they (we?) won't all die at once. 100s of people are dying now, mostly very elderly. If the panic wasn't ramped up, people would have barely noticed this against the background rate of deaths from other diseases. They would have started noticing when it got to around Italian levels, and very ineffectual lockdown/self-quarantine would start that wouldn't affect the economy nearly as much as it…

"Then it's back to normal" remains an utterly risible claim for what happens after two or three million Americans die in the span of a month.

Re: Federal Reserve slashes interest rates to zero

#298

Post by toomuchtodo »

toomuchtodo wrote: post #201
lbotos wrote: post #190

Earlier quoted context omitted.

> 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 th…

> Exclusive: Fed is ‘throwing money in the wrong place,’ says Sheila Bair, former top banking regulator | Published: March 16, 2020 at 6:50 a.m. ET

> Sheila Bair, a top U.S. banking regulator during the 2007-’08 global financial crisis, said the Federal Reserve needs to quickly shift its focus to getting credit flowing to U.S. businesses crippled by the spreading coronavirus and workers losing their jobs.

> “They are throwing money in the wrong place,” Bair said of an unprecedented move by the Fed on Sunday to slash benchmark rates to zero and start a $700 billion Treasury- and mortgage-bond buying program.

> “This isn’t a financial crisis — at least not yet,” she told MarketWatch on Sunday evening following the Fed’s announcement, which drops the target U.S. benchmark rate to zero and aims to shore up liquidity for banks and investors in the $15.6 trillion Treasury and $8.5 trillion agency mortgage bonds markets.

> “Lowering interest rates to zero doesn’t help if businesses can’t pay their loans back and they don’t have cash flow,” she said. “We need to get help out there, especially to small businesses and people already losing their jobs.”

https://www.marketwatch.com/story/exclusive-fed-is-throwing-...

Re: Federal Reserve slashes interest rates to zero

#299

Post by js2 »

sfj wrote: post #295
ShinyObject wrote: post #291

Earlier quoted context omitted.

Because uncoordinated individual action is ineffective against large scale problems, which should be obvious right now.

If he gave his money to a few people in need, it would be effective for them , wouldn't it? And probably better spent then after going through the tangled mess of government bureaucracy. What more could you hope for?

The GoFundMe model of health insurance and welfare doesn’t work. It’s my government’s job. It’s why we have social security and medicare and Medicaid and TANF, etc, in the first place. I can’t do it alone.

Promoting the general welfare is right in the preamble of our constitution:

> We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

And in the letter of transmittal, Washington wrote:

> Individuals entering into society, must give up a share of liberty to preserve the rest. The magnitude of the sacrifice must depend as well on situation and circumstance, as on the object to be obtained. It is at all times difficult to draw with precision the line between those rights which must be surrendered, and those which may be reserved.

Re: Federal Reserve slashes interest rates to zero

#300

Post by lbotos »

toomuchtodo wrote: post #298
toomuchtodo wrote: post #201

Earlier quoted context omitted.

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 th…

> Exclusive: Fed is ‘throwing money in the wrong place,’ says Sheila Bair, former top banking regulator | Published: March 16, 2020 at 6:50 a.m. ET > Sheila Bair, a top U.S. banking regulator during the 2007-’08 global financial crisis, said the Federal Reserve needs to quickly shift its focus to getting credit flowing to U.S. businesses crippled by the spreading coronavirus and workers losing their jobs. > “They are…

Because you may be in a position to educate me, how does the fed shift it's focus to getting credit flowing? a new loan program for businesses?
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