Fed Cut By Monday

Discussion in 'Economics' started by plugger, Oct 24, 2008.

  1. Yep!
     
    #11     Oct 24, 2008
  2. Banks must forgive all household debts. Then we can start over.
     
    #12     Oct 24, 2008
  3. gnome

    gnome

    Wayne Angel is calling for the same. He says "ZERO" so that the dividend yield on stocks looks attractive over cash.

    There is still a lot of forced liquidation due to the desire/demand to de-leverage. Perhaps the decline cannot be stopped until the forced selling has run its course? Perhaps the Fed should be (and should have been more) prudent and save some ammo for when it might still do some good. ??
     
    #13     Oct 24, 2008
  4. Fed has requisitioned the purchase of 50 Sikorskys , why are the buying helicopters?????
     
    #14     Oct 24, 2008
  5. plugger

    plugger


    Monetary policy is asymmetric. It works well to slow things down via interest rate increases but it doesn't work as well to get things going. As the Fed lowers interest rates, the cost of holding (hoarding) money drops, you can stick it under the mattress with very little opportunity cost. I think this is what is happening world wide. As Keynes called it, we're stuck in a "liquidity trap".

    The velocity of money has crashed. The Fed has put a lot of money in the system and it stops there. The credit creation process is broken at this point.

    But, looking through this, eventually it will unlock and there will be a wall of money hitting the economy. Say hello to my little friend gold.
     
    #15     Oct 24, 2008