Mercurius
First Avenue
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What should the Federal Reserve do? Are you more worried about a recession or inflation? Boy oh boy am I happy I am not Bernanke! If the rate is further lowered, will that cause foreign investors to pull out of US treasuries and what effect will that have on the National Debt?
http://www.nytimes.com/2008/01/20/magazine/20Ben-Bernanke-t.html
joev
Merion Village
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I would acutally raise interest rates half a point. I'm way more worried about inflation. I'm usually not this callous, but we don't need to be bailing out homeowners who bought too much house with ARMs.
Look at the value of our currency, and how much it has dropped over the past three years. Yes, it makes our exports cheaper, so there are more, but it also makes us run just to keep up. Inflation is real right now, but incomes aren't keeping pace.
TBDFITL
'Burbs
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I have no idea what the Fed should do. Raise 'em or lower 'em, no one is happy.
Both issues are particularly worrisome.
I'm more concerned about a recession right now. First, I'm searching for internships and thinking about what I'm going to do for a job in a year. Second, inflation wasn't across the board: the jump for overall inflation was caused by energy and food inflation. Oh, and unemployment is creeping upward.
I have a feeling inflation will get worse, though...and that only contributes to a recession.
Things aren't going well. Unfortunately for Bernanke, this was the hand he was dealt.
Mercurius
First Avenue
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joev wrote I would acutally raise interest rates half a point. I'm way more worried about inflation. I'm usually not this callous, but we don't need to be bailing out homeowners who bought too much house with ARMs.But isn't the Federal Reserves job to keep financial crisis (i.e. subprime debacle) from spilling over into the general economy. Wouldn't that necessitate another rate cut?Look at the value of our currency, and how much it has dropped over the past three years. Yes, it makes our exports cheaper, so there are more, but it also makes us run just to keep up. Inflation is real right now, but incomes aren't keeping pace.
Edit: Don't get me wrong, I tend to agree with you, just playing devils advocate.
gramarye
In Exile
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There are other tools available for that, though not all lie in the hands of the Federal Reserve. The subprime debacle can be firewalled with more tailor-made measures than nationwide monetary policy (which is a very wide and very blunt instrument ... a cudgel, not a scalpel).
The slide of the dollar and its loss of credibility as a viable long-term store of value, while not ideally packaged for news audiences (because the damage it does is indirect and hard to explain in a 2-minute sound bite), is a much more economically troublesome development. and one of much greater concern to the entire country rather than just one sector.
enzo
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I caught a bit of this last night on the news.....Radio Shack is closing its Groveport Outlet store and then.....
By Associated PressCOLUMBUS, Ohio -- Gov. Ted Strickland has directed state agencies to come up with plans for offering early retirement incentives to trim their work forces and save money.
http://www.nbc4i.com/midwest/cmh/search.apx.-content-articles-CMH-2008-01-15-0026.html
Brewmaster
Portland, OR
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Uncle Ted is proving to be quite the unconventional democrat, isn't he?
joev
Merion Village
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I think the subprime crisis is already (academically speaking) pretty contained. The entire subprime mortgage economy is way less that 1% of the US economy.
The more I hear about the Federal Reserve and Wall Street, the less I
trust. It seems that investors are looking for signs in the tea leaves instead of looking at the actual economy. Any rumbling from the Fed is like the words of the great and powerful Oz. People anaylze Bernanke's speeches, and if there's an inkling of evidence that a rate cut is coming, the markets bound up.
I would venture to say that the stock markets are higher right now than they really have a reason to be by about 2,000 points.
The fact of the matter is that Americans are spending a lot more than they are earning. Second mortgages and ARMs fund this spending that people can't afford. Any politician, Bernanke included, who suggests that saving is important would be labeled as destroying our strong market economy. But if people saved, our currency would be worth more, we could invest more wisely and more people wouldn't rely as much on the government for help.
captain janks
south side
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the fed should GTFO.
From the Great Depression, to the stagflation of the seventies, to the burst of the dotcom bubble last year, every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial "boom" followed by a recession or depression when the Fed-created bubble bursts.
With a stable currency, American exporters will no longer be held hostage to an erratic monetary policy. Stabilizing the currency will also give Americans new incentives to save as they will no longer have to fear inflation eroding their savings. Those members concerned about increasing America's exports or the low rate of savings should be enthusiastic supporters of this legislation.
Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy. Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of the special interests and their own appetite for big government.
Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.
In fact, Congress' constitutional mandate regarding monetary policy should only permit currency backed by stable commodities such as silver and gold to be used as legal tender. Therefore, abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nation's founders: one where the value of money is consistent because it is tied to a commodity such as gold. Such a monetary system is the basis of a true free-market economy.
Mercurius
First Avenue
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Thanks joev and gramarye, that is along the lines of what I was thinking but it seems that everything I hear via media seems to be saying the exact opposite. Even non traded companies like Kai Ryssdal and Susie Gharib seem to be jumping on the Band Wagon of when is the Fed going to cut rates. Good to hear others are thinking along the same lines as me.
joev
Merion Village
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Here's an interesting story in the Dispatch: State Treasurer Richard Cordray (I'm pretty sure he a reporter was on the Daily Show at some point...) is planning to start a program to get more Ohioans to save money.
Cordray wants to help you save
State program would offer higher interest rate
Thursday, January 17, 2008 3:30 AM
...
"We want Ohioans to get into the habit of saving and seeing some returns from it," Cordray said yesterday at a Downtown lunch meeting of the Columbus Metropolitan Club. "As a country, we've spent more than we've earned for the past seven or eight quarters. That's not a good path.
gramarye
In Exile
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An interesting concept, but a little on the tepid and halfhearted side, IMHO. Also, one wonders how $25 million is going to leverage 5-7% interest rates for these accounts, even with the $5000 cap. That's still potentially a lot of money, particularly if that rate is essentially guaranteed. The stock market averages about 8%, IIRC, but of course there are serious variations on that score.
Coremodels
Really close to Explorer's Club.
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gramarye wrote An interesting concept, but a little on the tepid and halfhearted side, IMHO. Also, one wonders how $25 million is going to leverage 5-7% interest rates for these accounts, even with the $5000 cap. That's still potentially a lot of money, particularly if that rate is essentially guaranteed. The stock market averages about 8%, IIRC, but of course there are serious variations on that score.
What's kind of funny about this, IMO, is that you can do this now if you want to...it's called municipal bonds.
Coremodels
Really close to Explorer's Club.
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in fact, Nuveen offers an Ohio Bond Fund that is currently yielding around 4% (triple tax free, however...so about a 6% T.E.Y.). It pays out monthly checks as well on your investment.
Mercurius
First Avenue
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WTF, Fed to cut interest rate by 0.75% :shock:
http://www.nytimes.com/2008/01/22/business/worldbusiness/23cnd-asiastox.html?_r=1&hp&oref=slogin
Tigertree
771 N. High St.
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I have been thinking for the last couple of weeks how I wish I had a ton of money right now, and if I did, how I would sink it into the housing market, and some safer stocks that I know are going to bounce back. I was thinking that maybe I was responding to this thing incorrectly, but then I heard a Warren Buffet quote today "be greedy when others are fearful," and decided I was right.
Why is no one screaming buy right now? I don't get it.
Mercurius
First Avenue
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I am screaming!
Edit: (not screaming buy like TT, more screaming Howard Dean style) this basically is saying "OK, inflation doesn't matter, the national debt doesn't matter." The market was behaving correct and was over valued. Keep an eye on food and fuel prices and you are going to see just about everyone who doesn't have a decent portion of their savings in stocks go broke. Companies are not going to increase salaries and just about everyone is going to be worse off because of this (unless you have half of your savings in stocks.)
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