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Fed cuts rate by 3/4 point!!!

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LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: Dissipate
Originally posted by: LegendKiller
Originally posted by: Jaskalas
Sooner or later these ?fixes? will create a crisis of their own.
As long as the crisis they cause are better than the crisis that would have been caused without them.

This is the crux of what many do not quite understand. These rate cuts are akin to chemo and radiation to cure aggressive cancer. Sure, the cancer sucks and we could have taken steps to prevent it, but we can't do anything about the past at this point. All we can do is treat the cancer aggressively and eventually put it into remission. At that point we get healthy again.

However, the other alternative is to take some herbal teas, hope that healthy living and a detoxifying diet along with some pain will cure the problem. People will say "let the market sort it out", where the market is your body and you use shit like Chlorela to give your body the tools to fight the cancer, by itself.

Sorry, but I don't have any trust in letting your body trying to work through it without some support that you *know* works to a certain extent.

As far as alternatives, nobody has presented any that will work. Letting the cancer go away by just letting banks fail is a ridiculous idea. It stuffs up the credit environment, which hurts consumers who are trying to refi out of ARMs into something that won't jack their rate up. Even now, they are getting unfavorable lending because the market is constipated.

Meanwhile, you get armchair econonomists pining for the days of a strong dollar, to the preclusion of all other factors. They claim that the market should "just take their medicine" without looking at what that entails. They also claim that these actions only save "bankers", yet fail to acknowledge that bankers and investors are taking their hits.

I love that internet prognosticators think they are so knowledgable about the financial market without having an inkling about what's going on inside of the markets.
How can anyone with any sense support the volatility the Fed has created in the market? If your head is screwed on straight there is no way you can support this. These fluctuations in the market are not natural and are actually very damaging.
How did the Fed orchastrate BSC losing every piece of liquidity it had?
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: Vic
And the Fed's move today just sent them right back up. If you didn't lock by this morning then forget it.

"What happened" is that the Fed's rate cuts are spurring ever more inflation into the economy which is killing long term bonds and rates.

It's a catch22. If you don't ease credit constipation, nobody will borrow and rates will go up, more banks will fail, and the market will become more constipated. If you ease it, inflation goes up hitting long-term rates.
 

Dissipate

Diamond Member
Jan 17, 2004
6,815
0
0
Originally posted by: LegendKiller

How did the Fed orchastrate BSC losing every piece of liquidity it had?
You are joking right? Two words: housing bubble, caused by ridiculously low interest rates.
 

OutHouse

Lifer
Jun 5, 2000
36,413
616
126
just print more money like they did during the 20's hence the Roaring 20's which lead to the stock market crash in 29 because the fed printed more money (notes) than we had gold.
 

StageLeft

No Lifer
Sep 29, 2000
70,150
2
0
Originally posted by: palehorse74
Originally posted by: Skoorb
Originally posted by: palehorse74
Any mortgage lenders in here happen to know the current offerings?

one word: REFINANCE! :)
Sorry to burst your bubble but mortgage rates are not going down appreciably. The bonds that back them know that inflation is a major concern and that's why 30 year is 6%+.
that doesnt quite make sense given last months offerings of around 5 to 5.5%... what happened?!

that sucks... i'm at 6.375%, but I wouldnt mind shaving some pts...
Link
Plus, the credit crunch is widening the gap between the federal funds rate and mortgage rates
There are other stories. Mortgage rates have not dropped as quickly as they did a few years ago.

 

Dissipate

Diamond Member
Jan 17, 2004
6,815
0
0
NASDAQ and S&P 500 up over 4% in one day with the DOW not far behind?!! Come on people this is craziness. This is like '29 all over again! If anyone thinks this is actually a good sign they are nuts and they ought to be committed!
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: Dissipate
Originally posted by: LegendKiller

How did the Fed orchastrate BSC losing every piece of liquidity it had?
You are joking right? Two words: housing bubble, caused by ridiculously low interest rates.
So, it wasn't 11 trillion in funds fleeing from the equity markets, pushing into the debt markets from domestic and international investors that caused the situation?

Ohhh, ok, I guess a glut of funds way beyond the Fed's control has absolutely nothing to do with long-term rates, but it's the Fed's short-term rates that make the difference.

Get a fucking clue.
 

Vic

Elite Member
Jun 12, 2001
48,680
9,843
136
Originally posted by: LegendKiller
Originally posted by: Vic
And the Fed's move today just sent them right back up. If you didn't lock by this morning then forget it.

"What happened" is that the Fed's rate cuts are spurring ever more inflation into the economy which is killing long term bonds and rates.

It's a catch22. If you don't ease credit constipation, nobody will borrow and rates will go up, more banks will fail, and the market will become more constipated. If you ease it, inflation goes up hitting long-term rates.
Yeah well, they've f'ed up big time. Credit is constipated, rates are up, and inflation is up.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: Vic
Originally posted by: LegendKiller
Originally posted by: Vic
And the Fed's move today just sent them right back up. If you didn't lock by this morning then forget it.

"What happened" is that the Fed's rate cuts are spurring ever more inflation into the economy which is killing long term bonds and rates.

It's a catch22. If you don't ease credit constipation, nobody will borrow and rates will go up, more banks will fail, and the market will become more constipated. If you ease it, inflation goes up hitting long-term rates.
Yeah well, they've f'ed up big time. Credit is constipated, rates are up, and inflation is up.
You never know something is the right decision until you try it. Unfortunately, economics isn't a science since there are way too many human psychological variables involved. Thus, it's an art that requires fine tuning and trial and error.

It seems that many do not get this.
 

Vic

Elite Member
Jun 12, 2001
48,680
9,843
136
Originally posted by: LegendKiller
Originally posted by: Vic
Originally posted by: LegendKiller
Originally posted by: Vic
And the Fed's move today just sent them right back up. If you didn't lock by this morning then forget it.

"What happened" is that the Fed's rate cuts are spurring ever more inflation into the economy which is killing long term bonds and rates.

It's a catch22. If you don't ease credit constipation, nobody will borrow and rates will go up, more banks will fail, and the market will become more constipated. If you ease it, inflation goes up hitting long-term rates.
Yeah well, they've f'ed up big time. Credit is constipated, rates are up, and inflation is up.
You never know something is the right decision until you try it. Unfortunately, economics isn't a science since there are way too many human psychological variables involved. Thus, it's an art that requires fine tuning and trial and error.

It seems that many do not get this.
Thanks, but I already understand that econ is not a hard science.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: Vic
Originally posted by: LegendKiller
Originally posted by: Vic
Originally posted by: LegendKiller
Originally posted by: Vic
And the Fed's move today just sent them right back up. If you didn't lock by this morning then forget it.

"What happened" is that the Fed's rate cuts are spurring ever more inflation into the economy which is killing long term bonds and rates.

It's a catch22. If you don't ease credit constipation, nobody will borrow and rates will go up, more banks will fail, and the market will become more constipated. If you ease it, inflation goes up hitting long-term rates.
Yeah well, they've f'ed up big time. Credit is constipated, rates are up, and inflation is up.
You never know something is the right decision until you try it. Unfortunately, economics isn't a science since there are way too many human psychological variables involved. Thus, it's an art that requires fine tuning and trial and error.

It seems that many do not get this.
Thanks, but I already understand that econ is not a hard science.
I know you certainly do, but many other's don't.
 

Dufusyte

Senior member
Jul 7, 2000
659
0
0
Originally posted by: Dissipate
NASDAQ and S&P 500 up over 4% in one day with the DOW not far behind?!! Come on people this is craziness.
Sharp rallies like this are a result of everyone who was Short suddenly buying to cover their position. They close out their short position because good news was announced and they fear a rally.

If the spike sinks back down in the coming days, it means there actually was no rally, just a bunch of shorts covering. In that case, the shorts will go short again and the slide continues.

This is what we have been seeing so far this year.

 

Dissipate

Diamond Member
Jan 17, 2004
6,815
0
0
Originally posted by: LegendKiller
I know you certainly do, but many other's don't.
Including you, because you contradict yourself. On the one hand economics is not a hard science and yet on the other hand we can expect the Fed to accurately master plan the economy? :confused:
 

sandorski

No Lifer
Oct 10, 1999
68,522
3,628
126
Dissipate is right about one thing: All this volatility is not really good. It's just too hard right now to draw conclusions on what will happen tomorrow. Every Gain today could easily be erased tomorrow. Now it's best to wait and see.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: Dissipate
Originally posted by: LegendKiller
I know you certainly do, but many other's don't.
Including you, because you contradict yourself. On the one hand economics is not a hard science and yet on the other hand we can expect the Fed to accurately master plan the economy? :confused:
Did I ever say that the Fed should master, has mastered, or will master plan the economy?

I think you're quite confused as to what the Fed is doing.
 

NoStateofMind

Diamond Member
Oct 14, 2005
9,711
6
76
It doesn't take a rocket scientist or a college degree to see that decreasing interest rates will cause inflation. Also that if reducing the interest rate doesn't have the desired effect, it wouldn't be in any stretch of the imagination to see that it probably won't work in the near future. What is the term for someone doing the same thing expecting a different result? Exactly.

Inflation is the end result, which is, the hidden tax if you will. Most of the population doesn't know this and just goes about their day oblivious. Of course they notice the gas prices, bread and cheese price increases but they do not know why. What do you think would happen if every American knew what the FED was doing to their money and that the rise in Oil/Gas prices isn't because of OPEC production output, but because of the weak dollar created by the FEDs' 24hr printing press?
 

NoStateofMind

Diamond Member
Oct 14, 2005
9,711
6
76
Originally posted by: LegendKiller
Originally posted by: Dissipate
Originally posted by: LegendKiller
I know you certainly do, but many other's don't.
Including you, because you contradict yourself. On the one hand economics is not a hard science and yet on the other hand we can expect the Fed to accurately master plan the economy? :confused:
Did I ever say that the Fed should master, has mastered, or will master plan the economy?

I think you're quite confused as to what the Fed is doing.
Would controlling banks be in that line of reasoning?

 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: PC Surgeon
Originally posted by: LegendKiller
Originally posted by: Dissipate
Originally posted by: LegendKiller
I know you certainly do, but many other's don't.
Including you, because you contradict yourself. On the one hand economics is not a hard science and yet on the other hand we can expect the Fed to accurately master plan the economy? :confused:
Did I ever say that the Fed should master, has mastered, or will master plan the economy?

I think you're quite confused as to what the Fed is doing.
Would controlling banks be in that line of reasoning?
Providing a liquid monetary system is in the line of reasoning. The Fed's decisions are predicated upon several variables.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Originally posted by: PC Surgeon
It doesn't take a rocket scientist or a college degree to see that decreasing interest rates will cause inflation. Also that if reducing the interest rate doesn't have the desired effect, it wouldn't be in any stretch of the imagination to see that it probably won't work in the near future. What is the term for someone doing the same thing expecting a different result? Exactly.

Inflation is the end result, which is, the hidden tax if you will. Most of the population doesn't know this and just goes about their day oblivious. Of course they notice the gas prices, bread and cheese price increases but they do not know why. What do you think would happen if every American knew what the FED was doing to their money and that the rise in Oil/Gas prices isn't because of OPEC production output, but because of the weak dollar created by the FEDs' 24hr printing press?
What alternative is there?
 

senseamp

Lifer
Feb 5, 2006
35,035
5,121
126
Bear market rally.
I am buyin IYR (Real Estate) puts and FXY (Japanese Yen) calls.
Either real estate or the dollar is gonna die. I'll let uncle Ben decide which one to kill :D
 

Dufusyte

Senior member
Jul 7, 2000
659
0
0
Originally posted by: PC Surgeon
It doesn't take a rocket scientist or a college degree to see that decreasing interest rates will cause inflation.
Normally:
  1. Fed lowers rates
    Therefore people borrow more and banks loan more
    Therefore there is more money entering into circulation
    Therefore there is inflation
However, in the current climate, people are not borrowing, and lenders are not lending.
  • People are not borrowing because they already are too far in debt
    Banks are not lending because people are already too far in debt
Since banks are not lending and people are not borrowing, there is no increase in the money supply; i.e., there is no money being created and circulating via new loans.

So, in this case, even if the Fed lowers the interest rate to 0% (like Japan in previous decades) there is still no inflation because no new loans are being generated. In fact, you can have deflation, because banks have to write off bad loans which were defaulted, and that money disappears, so the money supply actually shrinks.

The point is, the Fed normally can control inflation/deflation by lowering/raising interest rates, but this only works if people actually create new loans. If no one is making new loans, then lowering the Fed Rate has no effect. Witness Japan which simultaneously had deflation and a 0% interest rate.

 

senseamp

Lifer
Feb 5, 2006
35,035
5,121
126
Originally posted by: Dufusyte
Originally posted by: PC Surgeon
It doesn't take a rocket scientist or a college degree to see that decreasing interest rates will cause inflation.
Normally:
  1. Fed lowers rates
    Therefore people borrow more and banks loan more
    Therefore there is more money entering into circulation
    Therefore there is inflation
However, in the current climate, people are not borrowing, and lenders are not lending.
  • People are not borrowing because they already are too far in debt
    Banks are not lending because people are already too far in debt
Since banks are not lending and people are not borrowing, there is no increase in the money supply; i.e., there is no money being created and circulating via new loans.

So, in this case, even if the Fed lowers the interest rate to 0% (like Japan in previous decades) there is still no inflation because no new loans are being generated. In fact, you can have deflation, because banks have to write off bad loans which were defaulted, and that money disappears, so the money supply actually shrinks.

The point is, the Fed normally can control inflation/deflation by lowering/raising interest rates, but this only works if people actually create new loans. If no one is making new loans, then lowering the Fed Rate has no effect. Witness Japan which simultaneously had deflation and a 0% interest rate.
Don't worry, we have a wonderful government who will borrow and spend all the money it can get its hands on on our behalf.
 

Dufusyte

Senior member
Jul 7, 2000
659
0
0
Originally posted by: senseamp
Don't worry, we have a wonderful government who will borrow and spend all the money it can get its hands on on our behalf.
Actually they are forcing the money into our hands - witness the Economic Stimulus Checks arriving in your mailbox this summer.

This is just the first of Helicopter Ben's money drops. They are testing the distribution system. Expect Ben to start dropping more and more money into your mailbox in the coming years.
 

NoStateofMind

Diamond Member
Oct 14, 2005
9,711
6
76
Originally posted by: LegendKiller
Originally posted by: PC Surgeon
It doesn't take a rocket scientist or a college degree to see that decreasing interest rates will cause inflation. Also that if reducing the interest rate doesn't have the desired effect, it wouldn't be in any stretch of the imagination to see that it probably won't work in the near future. What is the term for someone doing the same thing expecting a different result? Exactly.

Inflation is the end result, which is, the hidden tax if you will. Most of the population doesn't know this and just goes about their day oblivious. Of course they notice the gas prices, bread and cheese price increases but they do not know why. What do you think would happen if every American knew what the FED was doing to their money and that the rise in Oil/Gas prices isn't because of OPEC production output, but because of the weak dollar created by the FEDs' 24hr printing press?
What alternative is there?
I'm not saying there is a positive alternative. But one will begin an earlier recovery. The FED is admittedly in a catch 22, but also know, it created that situation in which it is now in and we get to pay for it.
 

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