Discussion in 'Economics' started by Thunderdog, Oct 8, 2008.

  1. I don't really know or follow the timing of these things, but should not the interest rate cut have done more to buoy the markets by now if that was the intent of the coordinated rate decrease? The price action thus far is not overly compelling.

  2. pitz


    The yield curve is still inverted in the very short term part of the market.

    Until the yield curve manages to un-invert itself, through either T-bill issuance, or through further rate cuts, new money won't be effectively be injected into the system.

    That's the gist of what's going on. If the Fed was serious about fighting this, they would have lowered to a rate that is below that of 3-month T-bills. In other words, rates = 0.5%, instead of 1.5%.
  3. That wouldn't give them much wiggle room for next time. And there's always a next time.
  4. pitz


    Depends on what they're trying to accomplish. Yes, they could have lowered the rate to 0.5%. But that would perhaps set off large-scale and sudden selling in the US dollar.

    I agree that they have to do something. And I think the Fed should be open to monetizing not just financial assets such as securities, but also the plant and machinery of businesses. Especially businesses that are trading at a vast discount to their value (ie: oil companies) and produce valuable exportable goods (ie: oil).

    We'd all be better off with the Fed holding a gazillion bad oil wells, than a gazillion bad mortgages. That's for sure. And I trust the people at ExxonMobil to be the nations new bankers far more than I would the Wall Street folks. (and XOM has a low-cost branded retail distribution network to boot!)

    Back in the 'old' days, most banks were owned by producers, and run as a side business. Free-standing banks without some attachment and ownership by industry typically haven't been successful throughout history, simply because, in the really bad times, at least producers have assets to collateralize their operations..
  5. nasdorq


    why the heck did i click on a thread titled "hmmmm". I guess I just had to know what someone was thinking about
  6. davidjrjr


    lol, me 2
  7. I say again, should not the markets have recovered more by now with all of the intervention that had already taken place? Is this a harbinger of things to come? Thoughts?