I think you are TOTALLY WRONG. You see the icing, but not the cake. You see what the Fed/Gummint WANTS you to see so that you don't object to what they've done and continue to do.
I agree interest rates alone won't cure today's economic ills, and that healthy recessions (contractions in rate of growth are a better description) are just that - healthy for the economy, long-term. I think we're talking along similar lines and just disagreeing on the FED's target rate. What I'm not seeing is how a deflationary environment would be a 'healthy' one. All of those mortgages and debt are out there and you can't reverse them just because your assets are worth less. Much of the hyperbole today is the US's position as number one being at risk. Although it's an unpopular view I consider the US's position as number one to be untenable, regardless of policies, although I'd prefer to be proved wrong on that. Drastic measures such as raising interest rates and causing a deflationary environment could so easily be a kill rather than a cure to the economy, whereas a controlled recession + inflation should at the least give the FED more room to raise rates later.
Don't confuse what I am saying. I'm not saying that the FED and G-ment have been doing a great job. I'm not even saying they have been doing a good job. What I am saying is that we live in a Republic, and as such they should be acting according to the desires of the majority, regardless of whether they think it is the right thing to do. What I am contending is that they are doing just what the majority would vote for them to do. The majority of people in the US could have everything good about your policy explained to them and fully understand it, at which point they would be screaming for implementation of such a system. Then someone stands up and says that with implementation of that system comes the risk of a deflationary environment, including massive layoffs and plummeting home prices. The majority would then vote against your system even if they knew that the best they could hope for is a delayed depression. People have proven time and again that they don't vote for long-term anything. They vote for short-term promises. So are you proposing that we have a system in which the g-ment decides what is best for us regardless of what the public majority wants?
Oh you're broke? That's why you paper trade and complain about the Fed all day? Maybe go get a job and stop whining.
The whole idea of raising interest rates is to cut off credit and cool inflation. We stopped doing that sometime around 1985. Thus this entire system has become one inflated pyramid of debt that needs constant credit expansion to keep everything going. Once credit contracts even a tiny bit gigantic amounts of businesses go bust.
And why would we need anyone to help credit being cut off even more than it is right now? Looking at the TED spread and 2y swap rates shows panicking banks that are a) hoarding cash b) don't trust their peers c) unable/unwilling to disseminate credit to corporate/consumer customers.
Were at the point where it doenst matter wether its at 2 percent or one percent rates. The market is tightening up anyway regardless of what the fed does. Its like cocaine, the system needs more and more risky credit to keep going and the returns diminsh.
1. The 'TED" is merely the spread between Treasuries and CD's. The market sets the spread. Good banks can borrow cheaper than at risk banks. Period. 2. As is banks mark up the spread between LIBOR (depositor CD's) and retail loan rates. That used to me good enough. NOW they also have the advantage of borrowing at an artificially cheap Fed window and STILL lending at LIBOR + markup. Are the banks in turn speeding the recovery by offering cheap available credit? Not at all. They're doing what they've done in recent history. They borrow at the window and then leverage 10x into higher yielding fixed income securities. Or of course they can supplement their income by graciously issuing some 18% credit cards. In other words banks have NO PROBLEM telling consumers, home owners and business borrowers that enough is enough, you'll now have to pay more. Yet paradoxically the Fed facilitates the banks with a lower rate. Call it what it is. The Banks are just the retailers for the Fed. With a HUGE markup. They are the money changers in the peoples temple. And some day when a hot dog costs 10 bucks you'll see what a sham this "system" truly is.
Oh so you think the Fed has done a great job and everything is better, when if you new anything about markets you could see that things are worse, rates are higher and spreads are wider, prices for just about everything is much much much higher.. Damm you really are stupid, are you some ass kisser fed lover. Let me guess you have access to the discount window and your benefiting from all this hahahaha, oh that to funny.