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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

#251

Post by AnthonyMouse »

dharma1 wrote: post #173
AnthonyMouse wrote: post #161

Earlier quoted context omitted.

> 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…

It will be used to monetise government debt. You will see targeted fiscal action announced tomorrow, to the tune of perhaps a hundred billion or more, aiming to help the businesses (and employees of those businesses) that are (and will be) decimated by the freeze in economic activity, and the crash in demand. From the announcement on Friday it sounded like the financial aid to companies that need it will be distribut…

"Monetize government debt" is just another way of saying buy treasuries. Which makes some sense as long as the interest rate on treasures is positive -- the people who sell them to the Fed will then have cash and want something else to invest it in, and the Fed (and therefore the US treasury) effectively gets to collect the interest on those bonds.

But how much sense does it really make to have the Fed buy treasuries at a negative interest rate? They'd be paying someone else for the treasuries which they'd then have to pay interest on (instead of collecting interest), for the sole purpose of getting new money out into the economy. Obviously at that point it's time to consider alternate ways of getting the new money out there -- like just giving it out to everybody in the country as a UBI. Or if you want to do something equivalent with slightly different accounting, have Congress pass a UBI funded entirely with debt, but then the Fed monetizes the debt (and the new debt causes treasury rates to be zero instead of negative against the monetization).

Doing some kind of "targeted tax cuts" along the same lines might also work, but probably not as well, because governments suck hard at detail-oriented master plans like that and usually just end up creating a lot of harmful economic distortions. Across-the-board even distribution reduces the incentive for people to change their behavior in order to get the money while still getting the money out there, and not putting it disproportionately in the hands of the rich.

Re: Federal Reserve slashes interest rates to zero

#252

Post by LeoTinnitus »

daddypro wrote: post #18

Does this interest rate transfer to lower mortgage rates? Is now a good time to refinance loans?

Just apply and see what rate they give you. The initial applications are annoying but once you've done that you can drag your application with a lender out for a long time so long as they can still mark it as an "active" file.

I worked in the industry and your credit score was the primary reason we based off your rate, and we knocked it down a bit if there was a promo or if you had autopay.

You don't get dinged hard by just applying. Ask how long they keep your credit report before pulling it again and just get rate quotes during that time period. It's smart and also lenders know when they'll be increasing rates before it goes in affect so it doesn't hurt to do it now and then just wade it out.

Also ask for a rate modification. Nobody knows about this but you can request to get just your rate modified and nothing else changes. It's WAY less time consuming, cheaper, you don't need an appraisal, and can be done in a day. The downside is you can't get "new money" (more than your current principle balance) and you're not extending your loan.

Re: Federal Reserve slashes interest rates to zero

#253

Post by webninja »

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…

Reserve requirement were at 10%.

What happens now if someone deposits $100,000, the bank lends out $100k because it can, and the someone tries to withdraw their money?

Re: Federal Reserve slashes interest rates to zero

#254

Post by onlyrealcuzzo »

kds3 wrote: post #116
dcftoapv wrote: post #57

Earlier quoted context omitted.

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.

You can't avoid the bust unless you avoid the boom. But the Fed makes no effort to avoid the boom.

Re: Federal Reserve slashes interest rates to zero

#255

Post by mannanj »

dntbnmpls wrote: post #102
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…

> The signal here should be read as "whatever it takes to avoid a depression." Should it? > If the Fed loses this fight, game over. It might be game over for the Fed, but not the country. For most of america's history, the Fed didn't exist and the US did very well without the Fed. It's the same silly fearmongering rhetoric by the abusive powerful to the masses. Without us, it'll be chaos. The same argument was made t…

I actually like this. I would upvote, but I dont see the option.

Re: Federal Reserve slashes interest rates to zero

#256

Post by dcftoapv »

onlyrealcuzzo wrote: post #254
kds3 wrote: post #116

Earlier quoted context omitted.

> 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.

You can't avoid the bust unless you avoid the boom. But the Fed makes no effort to avoid the boom.

wtf are you talking about? They were raising interest rates and rolling assets off their balance sheet for the better part of 2018.

Re: Federal Reserve slashes interest rates to zero

#257

Post by digitaltrees »

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.

You don’t have an accurate sample size if you don’t measure. Based on the growth rates over time in every other country, the US should have way more cases. There are only a few thousand because we aren’t measuring.

FYI the governor of Ohio estimates 100,000 people in Ohio are infected. So there is that.

Re: Federal Reserve slashes interest rates to zero

#258

Post by digitaltrees »

Supermancho wrote: post #211
llampx wrote: post #168

Earlier quoted context omitted.

Technically it means minimum 3000 cases, probably more .

Cases are recorded. If it's not in a medical record, it's not a case. Technically, the reference was to ~3000 but someone then wanted to dispute that cases was not the same as infections. The number is irrelevant. If it's not known for sure, it's not a case and it's not a known infection, medically. I don't understand how factual correction gets downvoted, but here we are.

This is a pedantic word splitting argument. The relevant measure is number of people infected no the number we happen to know for sure because we finally got around to testing. If we had South Korea’s level of testing then maybe your argument would warrant breath behind words, under the current circumstances save your breath.

Re: Federal Reserve slashes interest rates to zero

#259

Post by nitrogen »

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.

As long as you vacation in places with few other people around, that is actually a really good way to spend the time.

Re: Federal Reserve slashes interest rates to zero

#260

Post by nitrogen »

appleiigs wrote: post #117
csense wrote: post #68

Earlier quoted context omitted.

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…

Small town Utah credit unions are much less risky than international banks.
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