Fed cuts half point in emergency move amid spreading virus • Hacker News Board

Re: Fed cuts half point in emergency move amid spreading virus

#81

Post by mech1234 » Tue, Mar 03, 2020, 3:40 PM UTC

budlightvirus wrote: post #56

mech1234 wrote: post #35

Interest rates have been on a secular decline over the course of the last century. Different economists have described this via various terms- "savings glut" is the one I like the most (even though I don't like Krugman). Right now there is so much saved cash out there looking to be lent out that any project looking for financing can find it for cheap. The Fed does not keep interest rates low in a vacuum. There is an…

What does "secular" mean to you?

In Economics, secular essentially refers to long-term trends regardless of boom-and-bust business cycles. The focus is on the long term. In the context of economics it has nothing to do with religiousness.

A secular trend is a variable that evidences a consistent pattern within a given period of time. It is a statistical tendency that can be easily identified and it is not subject to seasonal or cyclical effects. (https://www.myaccountingcourse.com/accounting-dictionary/sec...)

Re: Fed cuts half point in emergency move amid spreading virus

#82

Post by gdubs » Tue, Mar 03, 2020, 3:41 PM UTC

atq2119 wrote: post #47

ptyyy wrote: post #5

We're basically running out of tools to combat an actual financial crisis. https://www.investopedia.com/terms/l/liquiditytrap.asp

Only because the toolset is artificially restricted for ideological reasons. Fiscal responses (having the government spend actual money, either on things like infrastructure it by just handing it out to the population, which will then largely spend that money as they see fit) rather than monetary policy responses (reduce rates and hope that people will borrow more) are known to work well in most cases. The Corona vir…

Keynes famously said you could hire people to dig ditches and it would stimulate the economy.

However, if we were to take aggressive action on Climate Change, there’s a lot of potential jobs there. A massive potential stimulus. Also, you know, public funding of basic research which could explore, I don’t know, pandemic response, new therapeutics, etc.

Like you said, ideological barriers are what’s keeping us stuck. But before we went all in on finance we had a pretty epic run last century of productivity fueled by public investment (think 1940-1970).

Re: Fed cuts half point in emergency move amid spreading virus

#83

Post by wefarrell » Tue, Mar 03, 2020, 3:41 PM UTC

airstrike wrote: post #27

From what I gather after spending more time than I'm willing to admit listening to every finance talking head out there, the consensus on the street seems to be that this will result in a temporary market recovery followed by the continued deterioration of stock prices given that fiscal or monetary* policy can't really affect the real economy in the near term* i.e. if the supply chain is indeed impacted due to COVID-…

Fiscal/monetary policy has a real effect on the economy but only on the demand side.

Re: Fed cuts half point in emergency move amid spreading virus

#84

Post by cat199 » Tue, Mar 03, 2020, 3:41 PM UTC

vnchr wrote: post #11

The Dow finished up 1,294 points yesterday, making it its best one-day point gain on record.

and what's the 3 day / 5 day trend?

giant gains are not so important after giant losses, this is just celebrating volatility.

Re: Fed cuts half point in emergency move amid spreading virus

#85

Post by toomuchtodo » Tue, Mar 03, 2020, 3:41 PM UTC

asaph wrote: post #80

toomuchtodo wrote: post #75

Earlier quoted context omitted.

The entire world is about to have a supply chain disruption that you can't stoke into recovery using central bank policy. The Fed rarely lowers interest rates without notice. They're spooked.

What if this supply chain disruption is short term, and the world returns to business as usual soon?

That is a possible scenario, but not what market participant behavior is predicting. So, you either believe governments, or you believe the flow of trillions of dollars through the capital markets. The truth likely lies somewhere in the middle, waiting to be discovered.

Re: Fed cuts half point in emergency move amid spreading virus

#86

Post by learc83 » Tue, Mar 03, 2020, 3:41 PM UTC

bluedevil2k wrote: post #57

thedudeabides5 wrote: post #7

Earlier quoted context omitted.

Hey look on the bright side, we have another 100bps left in rates and then QE4. After that, yeah then it gets tough, but then again, maybe we get some actual fiscal stimulus which maybe buys the US some China style infrastructure!

A fiscal stimulus? Yes, let's go even more into debt than we already are.

It doesn't matter how much debt we are in provided the rate of return for the investment is greater than the interest on the new debt.

And that's without considering that inflation is very low, so we can print our way out of some of it.

Re: Fed cuts half point in emergency move amid spreading virus

#87

Post by _marlowe_ » Tue, Mar 03, 2020, 3:41 PM UTC

This is a supply shock. Cutting interest rates won't make widgets appear if the widget factory is idle...

Re: Fed cuts half point in emergency move amid spreading virus

#88

Post by airstrike » Tue, Mar 03, 2020, 3:41 PM UTC

JumpCrisscross wrote: post #68

airstrike wrote: post #27

From what I gather after spending more time than I'm willing to admit listening to every finance talking head out there, the consensus on the street seems to be that this will result in a temporary market recovery followed by the continued deterioration of stock prices given that fiscal or monetary* policy can't really affect the real economy in the near term* i.e. if the supply chain is indeed impacted due to COVID-…

> fiscal policy can't really affect the real economy Fiscal policy ( e.g. the government buying tanks) absolutely affects the real economy. The central bank doesn't control fiscal policy. It controls monetary policy. Monetary policy also affects the real economy, just indirectly.

Sorry and thank you – I meant to say fiscal or monetary specifically in the near term, meaning supply chain disruptions take much longer to undo. I've edited my post accordingly.

Re: Fed cuts half point in emergency move amid spreading virus

#89

Post by Mountain_Skies » Tue, Mar 03, 2020, 3:42 PM UTC

wonderwonder wrote: post #20

pastor_elm wrote: post #8

>The Fed also said in the statement that the “fundamentals of the U.S. economy remain strong.” So why cut the rate? Doesn't make any sense.

Because someone at the top with a limited grasp of economics but a great understanding of campaigning insisted on it.

Sounds like the Federal Reserve needs a backbone if they're so willing to change a major component of fiscal policy due to a few words.

Re: Fed cuts half point in emergency move amid spreading virus

#90

Post by mindslight » Tue, Mar 03, 2020, 3:42 PM UTC

ptyyy wrote: post #5

We're basically running out of tools to combat an actual financial crisis. https://www.investopedia.com/terms/l/liquiditytrap.asp

Because they've already been expended to keep the "growth" party going indefinitely, rather than ever letting things cool off. This includes 2008 - a short hiccup and then full speed ahead, culminating in VC's filling sidewalks and gullies with a glut of consumer goods, hoping for some kind of eventual profit. Eventually the bubble has to pop - when it's not allowed to do so relatively casually, it will do so catastrophically. When it's not allowed to do so at it's own time, it will do so at the worst time.