Fed slashes key rate .75 to 3.5%

[LegendKiller]

Originally posted by: smashp

Originally posted by: LegendKiller

Originally posted by: Dari
The Federal Reserve sucks. First they let the interest rate dip low enough to bring about cheap money. Once they realized what they did, they increase the rates...but only slowly. When the effects of cheap money comes to bite the economy in the ass, what do they do? Well, lower it dramatically again, of course. I think these "economists" need to be replaced by computers.

What exactly were they supposed to do? I would love to hear your wizened opinion.

they shoul Protect from Inflation and the Overall health of the macro-economy rather that protecting their golf-buddies portfolios

Who do you think owns almost 80% of all stock in this country? Where do you think the jobs come from? Do you think people like volatility?

People have such a conspiratorial theory about all of this. "OMG, TEH RICH PEOPLES!". Please the economy and these rate cuts, are about more than the rich people.

 

[FoBoT]

Originally posted by: mrCide
If we go into a recession (aren't we already?) then shouldn't we come out of it naturally without media and the government screwing with it?

it is an election year, neither party wants 10% unemployment in Nov. when people are voting

 

[Dari]

Originally posted by: LegendKiller

Originally posted by: Dari
The Federal Reserve sucks. First they let the interest rate dip low enough to bring about cheap money. Once they realized what they did, they increase the rates...but only slowly. When the effects of cheap money comes to bite the economy in the ass, what do they do? Well, lower it dramatically again, of course. I think these "economists" need to be replaced by computers.

What exactly were they supposed to do? I would love to hear your wizened opinion.

No need to be a smart-ass. It's obvious that the Feds would rather see the economy go up and up, but that really isn't their job. They are managers of the economy and, hence, should set a specific goal for inflation and fight to keep it there. When the economy is growing at super-healthy rates, they should put on the brakes just as fast they they drop interest rates when there is even a sign that the economy is going down. In other words, their reactions aren't balanced at all. This was a common criticism levelled at Greenspan and Bernanke is repeating them. I think an impartial computer can do this much better than humans.

 

[LegendKiller]

Originally posted by: Dari

Originally posted by: LegendKiller

Originally posted by: Dari
The Federal Reserve sucks. First they let the interest rate dip low enough to bring about cheap money. Once they realized what they did, they increase the rates...but only slowly. When the effects of cheap money comes to bite the economy in the ass, what do they do? Well, lower it dramatically again, of course. I think these "economists" need to be replaced by computers.

What exactly were they supposed to do? I would love to hear your wizened opinion.

No need to be a smart-ass. It's obvious that the Feds would rather see the economy go up and up, but that really isn't their job. They are managers of the economy and, hence, should set a specific goal for inflation and fight to keep it there. When the economy is growing at super-healthy rates, they should put on the brakes just as fast they they drop interest rates when there is even a sign that the economy is going down. In other words, their reactions aren't balanced at all. This was a common criticism levelled at Greenspan and Bernanke is repeating them. I think an impartial computer can do this much better than humans.

There is no "correct" way to do these things. The Fed needs to balance so many different variables that it's impossible to take such a black/white viewpoint on the situation. In the perfect scenario the Fed would be raising rates. However, that'd absolutely murder the financial markets, eventually resulting in millions of layoffs and plunging us into a situation much worse and much more long-term.

People think this is so easy, fight inflation. Sorry, but it isn't, they have to take into account whether floating the economy down is a better idea than just worrying about inflation.

Stop looking at this as a binary problem.

 

[Dari]

Originally posted by: LegendKiller

Originally posted by: Dari

Originally posted by: LegendKiller

Originally posted by: Dari
The Federal Reserve sucks. First they let the interest rate dip low enough to bring about cheap money. Once they realized what they did, they increase the rates...but only slowly. When the effects of cheap money comes to bite the economy in the ass, what do they do? Well, lower it dramatically again, of course. I think these "economists" need to be replaced by computers.

What exactly were they supposed to do? I would love to hear your wizened opinion.

No need to be a smart-ass. It's obvious that the Feds would rather see the economy go up and up, but that really isn't their job. They are managers of the economy and, hence, should set a specific goal for inflation and fight to keep it there. When the economy is growing at super-healthy rates, they should put on the brakes just as fast they they drop interest rates when there is even a sign that the economy is going down. In other words, their reactions aren't balanced at all. This was a common criticism levelled at Greenspan and Bernanke is repeating them. I think an impartial computer can do this much better than humans.

There is no "correct" way to do these things. The Fed needs to balance so many different variables that it's impossible to take such a black/white viewpoint on the situation. In the perfect scenario the Fed would be raising rates. However, that'd absolutely murder the financial markets, eventually resulting in millions of layoffs and plunging us into a situation much worse and much more long-term.

People think this is so easy, fight inflation. Sorry, but it isn't, they have to take into account whether floating the economy down is a better idea than just worrying about inflation.

Stop looking at this as a binary problem.

You honestly don't think that all these variables could be turned into an algorithm and handed to computers for optimization? Given all the rules in economics (not necessarily mathematical equations), you'd think weights could be added to each variable depending on the economic environment.

 

[theeedude]

Originally posted by: LegendKiller

Originally posted by: senseamp
The fed should fight inflation, exclusively.

Agreed that that is one mandate. However, the situation is more complicated than that, vastly more complicated.

I see quite a bit of it at work and some of it's a bit worrying.

Outside of regular debt, mortgages, CDO, auto loans, or student loans, the country operates off of a lot more debt, including trade receivables and such. Much of it's financed in the short-term commercial paper market. However, those markets are so roiled as to make most difficult to fund, which increases costs and has a trickle down effect.

The Fed also has to keep watch over the markets and they are in a massive conundrum. They can let the financial markets absolutely tank, or they can try to prevent that while still trying to control inflation.

I think they should only pay attention to inflation, not try to manipulate the markets.
Markets will sort themselves out.

 

[LegendKiller]

Originally posted by: Dari

Originally posted by: LegendKiller

Originally posted by: Dari

Originally posted by: LegendKiller

Originally posted by: Dari
The Federal Reserve sucks. First they let the interest rate dip low enough to bring about cheap money. Once they realized what they did, they increase the rates...but only slowly. When the effects of cheap money comes to bite the economy in the ass, what do they do? Well, lower it dramatically again, of course. I think these "economists" need to be replaced by computers.

What exactly were they supposed to do? I would love to hear your wizened opinion.

No need to be a smart-ass. It's obvious that the Feds would rather see the economy go up and up, but that really isn't their job. They are managers of the economy and, hence, should set a specific goal for inflation and fight to keep it there. When the economy is growing at super-healthy rates, they should put on the brakes just as fast they they drop interest rates when there is even a sign that the economy is going down. In other words, their reactions aren't balanced at all. This was a common criticism levelled at Greenspan and Bernanke is repeating them. I think an impartial computer can do this much better than humans.

There is no "correct" way to do these things. The Fed needs to balance so many different variables that it's impossible to take such a black/white viewpoint on the situation. In the perfect scenario the Fed would be raising rates. However, that'd absolutely murder the financial markets, eventually resulting in millions of layoffs and plunging us into a situation much worse and much more long-term.

People think this is so easy, fight inflation. Sorry, but it isn't, they have to take into account whether floating the economy down is a better idea than just worrying about inflation.

Stop looking at this as a binary problem.

You honestly don't think that all these variables could be turned into an algorithm and handed to computers for optimization? Given all the rules in economics (not necessarily mathematical equations), you'd think weights could be added to each variable depending on the economic environment.

It's not as simple as that. Furthermore, computers are prone to their own problems. GIGO is the first among them. What numbers do you use? You're still removing the "gut feeling" aspect of an experienced person.

 

[LegendKiller]

Originally posted by: senseamp

Originally posted by: LegendKiller

Originally posted by: senseamp
The fed should fight inflation, exclusively.

Agreed that that is one mandate. However, the situation is more complicated than that, vastly more complicated.

I see quite a bit of it at work and some of it's a bit worrying.

Outside of regular debt, mortgages, CDO, auto loans, or student loans, the country operates off of a lot more debt, including trade receivables and such. Much of it's financed in the short-term commercial paper market. However, those markets are so roiled as to make most difficult to fund, which increases costs and has a trickle down effect.

The Fed also has to keep watch over the markets and they are in a massive conundrum. They can let the financial markets absolutely tank, or they can try to prevent that while still trying to control inflation.

I think they should only pay attention to inflation, not try to manipulate the markets.
Markets will sort themselves out.

Their job is the flow of money and maintaining a well running economy. That's the role of any central bank. The tool for that is liquidity. All they are doing is ensuring there is liquidity in the market, enough to not freeze up the situation.

I am really serious when I say that there was *no* liquidity in Aug or Dec, which really scared the shit out of people, including me. When you can't get rid of *overnight* fully bank supported commercial paper, it's ridiculous. Then, when said paper funds at LIBOR+100, meaning that *RISKLESS* paper is trading almost at prime levels, means that liquidity is fooked.

People on the outside think this is about manipulating the economy. It's not, its about maintaining an orderly financial market. Furthermore, the effects of a precipitous downturn would be horrendous internationally.

 

[Dari]

Originally posted by: LegendKiller

Originally posted by: Dari

Originally posted by: LegendKiller

Originally posted by: Dari

Originally posted by: LegendKiller

Originally posted by: Dari
The Federal Reserve sucks. First they let the interest rate dip low enough to bring about cheap money. Once they realized what they did, they increase the rates...but only slowly. When the effects of cheap money comes to bite the economy in the ass, what do they do? Well, lower it dramatically again, of course. I think these "economists" need to be replaced by computers.

What exactly were they supposed to do? I would love to hear your wizened opinion.

No need to be a smart-ass. It's obvious that the Feds would rather see the economy go up and up, but that really isn't their job. They are managers of the economy and, hence, should set a specific goal for inflation and fight to keep it there. When the economy is growing at super-healthy rates, they should put on the brakes just as fast they they drop interest rates when there is even a sign that the economy is going down. In other words, their reactions aren't balanced at all. This was a common criticism levelled at Greenspan and Bernanke is repeating them. I think an impartial computer can do this much better than humans.

There is no "correct" way to do these things. The Fed needs to balance so many different variables that it's impossible to take such a black/white viewpoint on the situation. In the perfect scenario the Fed would be raising rates. However, that'd absolutely murder the financial markets, eventually resulting in millions of layoffs and plunging us into a situation much worse and much more long-term.

People think this is so easy, fight inflation. Sorry, but it isn't, they have to take into account whether floating the economy down is a better idea than just worrying about inflation.

Stop looking at this as a binary problem.

You honestly don't think that all these variables could be turned into an algorithm and handed to computers for optimization? Given all the rules in economics (not necessarily mathematical equations), you'd think weights could be added to each variable depending on the economic environment.

It's not as simple as that. Furthermore, computers are prone to their own problems. GIGO is the first among them. What numbers do you use? You're still removing the "gut feeling" aspect of an experienced person.

OK, they don't have to follow it slavishly, but the political pressure put on these governors is overwhelming. Add to that the fact that these governors and members of the Federal Reserve are representatives of the same banks that made these atrocious mistakes and you can see that they are just saving themselves from their own errors under the guise of economic management.

 

[rchiu]

Originally posted by: Dari

Originally posted by: LegendKiller

Originally posted by: Dari

Originally posted by: LegendKiller

Originally posted by: Dari
The Federal Reserve sucks. First they let the interest rate dip low enough to bring about cheap money. Once they realized what they did, they increase the rates...but only slowly. When the effects of cheap money comes to bite the economy in the ass, what do they do? Well, lower it dramatically again, of course. I think these "economists" need to be replaced by computers.

What exactly were they supposed to do? I would love to hear your wizened opinion.

No need to be a smart-ass. It's obvious that the Feds would rather see the economy go up and up, but that really isn't their job. They are managers of the economy and, hence, should set a specific goal for inflation and fight to keep it there. When the economy is growing at super-healthy rates, they should put on the brakes just as fast they they drop interest rates when there is even a sign that the economy is going down. In other words, their reactions aren't balanced at all. This was a common criticism levelled at Greenspan and Bernanke is repeating them. I think an impartial computer can do this much better than humans.

There is no "correct" way to do these things. The Fed needs to balance so many different variables that it's impossible to take such a black/white viewpoint on the situation. In the perfect scenario the Fed would be raising rates. However, that'd absolutely murder the financial markets, eventually resulting in millions of layoffs and plunging us into a situation much worse and much more long-term.

People think this is so easy, fight inflation. Sorry, but it isn't, they have to take into account whether floating the economy down is a better idea than just worrying about inflation.

Stop looking at this as a binary problem.

You honestly don't think that all these variables could be turned into an algorithm and handed to computers for optimization? Given all the rules in economics (not necessarily mathematical equations), you'd think weights could be added to each variable depending on the economic environment.

If someone can come up with a model that can predict/determine the economy based on variables correctly without human intervention, the guy would be rich like hell. Until then, we cannot really take that responsibility from Fed and handed it to computers. Not saying Fed will always be right, but human experience still counts.

 

[LegendKiller]

Originally posted by: Dari


OK, they don't have to follow it slavishly, but the political pressure put on these governors is overwhelming. Add to that the fact that these governors and members of the Federal Reserve are representatives of the same banks that made these atrocious mistakes and you can see that they are just saving themselves from their own errors under the guise of economic management.

There aren't really any political pressures. The fed does operate in somewhat of a vacuum. Sure, the President can fire a governor or the chairman, but they try to stay out of the Fed to remove any perception of influence. There have been several presidents who have gone to war with chairmen, but mostly it is a war of words.

The Fed is not representative of the banks who made the mistake. The Fed is the system that controls the flow to and fro. They represent nobody/nothing but the liquidity in the system.

 

[Dari]

Originally posted by: rchiu

Originally posted by: Dari

Originally posted by: LegendKiller

Originally posted by: Dari

Originally posted by: LegendKiller

Originally posted by: Dari
The Federal Reserve sucks. First they let the interest rate dip low enough to bring about cheap money. Once they realized what they did, they increase the rates...but only slowly. When the effects of cheap money comes to bite the economy in the ass, what do they do? Well, lower it dramatically again, of course. I think these "economists" need to be replaced by computers.

What exactly were they supposed to do? I would love to hear your wizened opinion.

No need to be a smart-ass. It's obvious that the Feds would rather see the economy go up and up, but that really isn't their job. They are managers of the economy and, hence, should set a specific goal for inflation and fight to keep it there. When the economy is growing at super-healthy rates, they should put on the brakes just as fast they they drop interest rates when there is even a sign that the economy is going down. In other words, their reactions aren't balanced at all. This was a common criticism levelled at Greenspan and Bernanke is repeating them. I think an impartial computer can do this much better than humans.

There is no "correct" way to do these things. The Fed needs to balance so many different variables that it's impossible to take such a black/white viewpoint on the situation. In the perfect scenario the Fed would be raising rates. However, that'd absolutely murder the financial markets, eventually resulting in millions of layoffs and plunging us into a situation much worse and much more long-term.

People think this is so easy, fight inflation. Sorry, but it isn't, they have to take into account whether floating the economy down is a better idea than just worrying about inflation.

Stop looking at this as a binary problem.

You honestly don't think that all these variables could be turned into an algorithm and handed to computers for optimization? Given all the rules in economics (not necessarily mathematical equations), you'd think weights could be added to each variable depending on the economic environment.

If someone can come up with a model that can predict/determine the economy based on variables correctly without human intervention, the guy would be rich like hell. Until then, we cannot really take that responsibility from Fed and handed it to computers. Not saying Fed will always be right, but human experience still counts.

Experience is in the data.

 

[Dari]

Originally posted by: LegendKiller

Originally posted by: Dari


OK, they don't have to follow it slavishly, but the political pressure put on these governors is overwhelming. Add to that the fact that these governors and members of the Federal Reserve are representatives of the same banks that made these atrocious mistakes and you can see that they are just saving themselves from their own errors under the guise of economic management.

There aren't really any political pressures. The fed does operate in somewhat of a vacuum. Sure, the President can fire a governor or the chairman, but they try to stay out of the Fed to remove any perception of influence. There have been several presidents who have gone to war with chairmen, but mostly it is a war of words.

The Fed is not representative of the banks who made the mistake. The Fed is the system that controls the flow to and fro. They represent nobody/nothing but the liquidity in the system.

Are you sure about that? I thought the Federal Reserve's members were composed of banks? And even though there are various other ways of getting capital (i.e. investment banks), the banks were the ones that sold these fancy CDOs (and other security products) to those with an appetite for risk. Ironically, they also loaned money to the same customers. IOW, they had their hands in both pockets of these companies, increasing the risk should something go bad. They banks thought they had it all figured out but they were wrong. Now the Fed is here to save their ass:roll:

 

[smashp]

Originally posted by: LegendKiller

Originally posted by: smashp

Originally posted by: LegendKiller

Originally posted by: Dari
The Federal Reserve sucks. First they let the interest rate dip low enough to bring about cheap money. Once they realized what they did, they increase the rates...but only slowly. When the effects of cheap money comes to bite the economy in the ass, what do they do? Well, lower it dramatically again, of course. I think these "economists" need to be replaced by computers.

What exactly were they supposed to do? I would love to hear your wizened opinion.

they shoul Protect from Inflation and the Overall health of the macro-economy rather that protecting their golf-buddies portfolios

Who do you think owns almost 80% of all stock in this country? Where do you think the jobs come from? Do you think people like volatility?

People have such a conspiratorial theory about all of this. "OMG, TEH RICH PEOPLES!". Please the economy and these rate cuts, are about more than the rich people.

Agreed, But if you believe in Market forces, then the Fed needs to stop protecting people from their bad investment decisions and let the market corect, because it will always corect.

But the longer they postpone the pain, the more pain their will be.

 

[rchiu]

Originally posted by: Dari


Experience is in the data.

Not everything is quantifiable into numbers

 

[LegendKiller]

Originally posted by: Dari

Originally posted by: LegendKiller

Originally posted by: Dari


OK, they don't have to follow it slavishly, but the political pressure put on these governors is overwhelming. Add to that the fact that these governors and members of the Federal Reserve are representatives of the same banks that made these atrocious mistakes and you can see that they are just saving themselves from their own errors under the guise of economic management.

There aren't really any political pressures. The fed does operate in somewhat of a vacuum. Sure, the President can fire a governor or the chairman, but they try to stay out of the Fed to remove any perception of influence. There have been several presidents who have gone to war with chairmen, but mostly it is a war of words.

The Fed is not representative of the banks who made the mistake. The Fed is the system that controls the flow to and fro. They represent nobody/nothing but the liquidity in the system.

Are you sure about that? I thought the Federal Reserve's members were composed of banks? And even though there are various other ways of getting capital (i.e. investment banks), the banks were the ones that sold these fancy CDOs (and other security products) to those with an appetite for risk. Ironically, they also loaned money to the same customers. IOW, they had their hands in both pockets of these companies, increasing the risk should something go bad. They banks thought they had it all figured out but they were wrong. Now the Fed is here to save their ass:roll:

There's a reason why all member banks have to own a part of the Fed and it has nothing to do with representation.

Again, stop thinking of this as a problem with investors and start thinking about it as a problem of liquidity and the macro effects of a precipitous decline in the economy.

 

[LegendKiller]

Originally posted by: smashp

Originally posted by: LegendKiller

Originally posted by: smashp

Originally posted by: LegendKiller

Originally posted by: Dari
The Federal Reserve sucks. First they let the interest rate dip low enough to bring about cheap money. Once they realized what they did, they increase the rates...but only slowly. When the effects of cheap money comes to bite the economy in the ass, what do they do? Well, lower it dramatically again, of course. I think these "economists" need to be replaced by computers.

What exactly were they supposed to do? I would love to hear your wizened opinion.

they shoul Protect from Inflation and the Overall health of the macro-economy rather that protecting their golf-buddies portfolios

Who do you think owns almost 80% of all stock in this country? Where do you think the jobs come from? Do you think people like volatility?

People have such a conspiratorial theory about all of this. "OMG, TEH RICH PEOPLES!". Please the economy and these rate cuts, are about more than the rich people.

Agreed, But if you believe in Market forces, then the Fed needs to stop protecting people from their bad investment decisions and let the market corect, because it will always corect.

But the longer they postpone the pain, the more pain their will be.

How is the Fed protecting anybody from their bad investments? Are banks not writing down tens of billions of dollars? Are people involved in housing still losing value? Are financial sector investors not losing money?

The Fed is not protecting anybody except for the general economy.

 

[Dari]

Originally posted by: rchiu

Originally posted by: Dari


Experience is in the data.

Not everything is quantifiable into numbers

We learn from our mistakes. That's one reason why we study history.

 

[rchiu]

Originally posted by: LegendKiller

How is the Fed protecting anybody from their bad investments? Are banks not writing down tens of billions of dollars? Are people involved in housing still losing value? Are financial sector investors not losing money?

The Fed is not protecting anybody except for the general economy.

I think that used to be true, the Fed is suppose to be independent and operates based on economic interests, not political interest. But these days, the Fed system seem to interact with the politicians more and more and I wonder how much pressure the Fed is getting from the politicians to do things for political purpose.

For all the talk about recessions in the media, I haven't seen numbers that support an economic recession. Last quarters GDP growth were still decent, we will have to wait til end of this month to see the GDP growth figure. I don't haven't seen any economic indicator that's significantly worse than last year, or shows a consistent declining trend for the last few month. The only thing that's tanking is the stock market, and I do not equate stock market to the economy.

Bernanke met with politicians last week, stock market tanked last week, and this week he announced a huge cut. Just feel like this is a move pressured by the politicians aimed at calming the investment community, not for the benefit of the overall economy.

 

[LegendKiller]

Originally posted by: rchiu

Originally posted by: LegendKiller

How is the Fed protecting anybody from their bad investments? Are banks not writing down tens of billions of dollars? Are people involved in housing still losing value? Are financial sector investors not losing money?

The Fed is not protecting anybody except for the general economy.

I think that used to be true, the Fed is suppose to be independent and operates based on economic interests, not political interest. But these days, the Fed system seem to interact with the politicians more and more and I wonder how much pressure the Fed is getting from the politicians to do things for political purpose.

For all the talk about recessions in the media, I haven't seen numbers that support an economic recession. Last quarters GDP growth were still decent, we will have to wait til end of this month to see the GDP growth figure. I don't haven't seen any economic indicator that's significantly worse than last year, or shows a consistent declining trend for the last few month. The only thing that's tanking is the stock market, and I do not equate stock market to the economy.

Bernanke met with politicians last week, stock market tanked last week, and this week he announced a huge cut. Just feel like this is a move pressured by the politicians aimed at calming the investment community, not for the benefit of the overall economy.

The difference was that yesterday it was evident the market was going to be very disrupted. No need to look for connections where none exist.

 

[Dari]

http://www.nytimes.com/2008/01...nke&st=nyt&oref=slogin

As if to forestall criticism that the Fed had bowed to markets, its statement said ?the upside risks to inflation roughly balance the downside risks to growth? ? a clear indication that no more cuts were anticipated. Still, Jim Cramer, the high-voltage CNBC stock tout, gloated, ?The Fed has got your back,? implying gleefully that the Fed would protect investors at all costs. The Economist charged that the chief was a ?pushover? for Wall Street, and The Wall Street Journal opined that the Bernanke Fed had become a ?Pavlovian? slave to the market.