Fed Cuts Rates to Near 0%, Vows to Bolster Economy

[jporteous]

CNBC

http://www.cnbc.com/id/28254875

The Federal Reserve slashed its target for overnight interest rates to a record low of zero to 0.25 percent, and said it would employ "all available tools" to battle a year-long recession.

The surprise move to lower its target for the benchmark federal funds rate from one percent puts the Fed in uncharted territory. Financial markets had expected the Fed to lower rates by no more than three-quarters of a point, to 0.25 percent.

What is the flow on impact to NZ + how quickly will it be felt?

Jono

[flyernzl]

Savers will be penalized.

[typhoon]

quake rattle & roll...

now it gets REALLY ugly

[eri]

having now fired every bullet in the magazine at the beast we are sure we have stopped it

if we haven't stopped it there is more we can do with the rifle

we can reverse it and beat the beast around the head with it

or we can poke it in the eye with the barrel

failing that we have a banana

http://jp.youtube.com/watch?v=4bCyIAsSid8

[Austrokiwi]

CharGing beast, no ammunition left = RUN!!!

[Gibber]

CharGing beast, no ammunition left = RUN!!!

Just use a different weapon..

Mr Bernanke correctly judged the risk of deflation
By Ambrose Evans-Pritchard
Last Updated: 5:55AM GMT 17 Dec 2008

Mr Bernanke has not run out of ammunition yet. He has a nuclear arsenal, and has begun to use it. The Fed is already buying mortgage debt. It has infinite means of injecting stimulus into the economy by `quantitiative easing’, if needs be. It can ultimately print money and hang it on Christmas trees.

What the outcome will be will be anyone's guess. Bernanke knows what didn't work in Japan in the 1990's. At this moment in time, the actions being taken are based on an unproven theory. That is, Bernanke thinks he knows what should be done to avert a depression. The arsenal used so far has never been used before. Either to combat a bog-standard recession or the scenario currently facing the US/world. So the actions being undertaken by Bernanke haven't been proven to work... A very interesting time we live in.

[Gatekeeper]

Just use a different weapon..

Mr Bernanke correctly judged the risk of deflation
By Ambrose Evans-Pritchard
Last Updated: 5:55AM GMT 17 Dec 2008

What the outcome will be will be anyone's guess. Bernanke knows what didn't work in Japan in the 1990's. At this moment in time, the actions being taken are based on an unproven theory. That is, Bernanke thinks he knows what should be done to avert a depression. The arsenal used so far has never been used before. Either to combat a bog-standard recession or the scenario currently facing the US/world. So the actions being undertaken by Bernanke haven't been proven to work... A very interesting time we live in.

Interesting article. Especially the comments.
I liked this one from Tony P.:

AEP you disappoint me. Not because I disagree so deeply with your conclusion that a Keynesian approach is the only answer to the current crisis but because I thought that you were an academic economist able to think outside the square and it seems that I was wrong.

The trouble with most academic economists is that they have a tunnel vision to a great extent due to the fact they have been fed with second-hand ideas from an early age and persuaded that economics is a science rather than an art. Economics is not a matter of statistics,economic models and theories but part and parcel of every persons everyday life. Like it or not,the natural rules which apply at an individual and family level have to apply at national or international levels if decent social values are to be maintained and the social anarchy of the jungle avoided.

To be simplistic, it is wrong to punish the thrifty because of the debts created by the extravagent just as it is wrong to expect a past or future generation to pay for a current spendthrift one. That has to be true, whatever the consequences.

However, I could live with the argument that the consquences would be so dreadful that decent values had to be abandoned (although I wouldn't agree) if there was the remotest possibility that what you. Brown, Bernanke and Uncle Tom Cobbley et al were advocating would provide a solution rather than a very temporary and, indeed, harmful bandaid.

So far as I can see, you have made no attempt to analyse the root cause of the current problem - which is the globalisation of the USA economic policies (which are not traditional capitalism) and how to rectify the results.

Surely, the real questions which have to be addressed at the current moment is how do we RETURN to a situation where we (the human race) stop wasting finite resources and start producing only things which are necessary and which will last a lifetime in a way which doesn't destroy the environment on which we depend to exist.

I think that the Western world at least could do with a bit of deflation - economic and egocentric - and a little less of economists' verities and certainties.
Tony P
on December 17, 2008
at 05:40 AM
Report this comment

That sums up what I'm about. The only way to get through this is for one individual at a time to decide not to play their game.
I don't like the banking system in it's current form, it's destructive and most don't even begin to understand it and it's toll on what keeps us alive, healthy and happy, so I don't use their services if at all possible. I don't like the corporatists monopolies, so once again I keep them as far away from any control as I can, which is very difficult.

This ponzi scheme will go on, until we say no more! It's the best thing you could do for your kids and their kids. Enough of the "me me" forget the future society unless you want these boom bust cycles again and again.
The rich get richer until it all collapses. We are seeing it happen right now, the future capital has been misallocated into eg: houses.

John P. agrees with me, that what has been exported from the US is not Capitalism.

[k1w1]

Yeah, yeah. Put away your tiedie kaftan and birkenstocks, you bloody hippie :-)

[67910241]

too true

the system is flawed, unstable, crooked, unfair, and consequently a choice & fun environment to play in. Yes, it too screws the underclasses, but so does any other.

The only thing I can realistically regret is not having milked it enough before it went dry.

[Gatekeeper]

Yeah, yeah. Put away your tiedie kaftan and birkenstocks, you bloody hippie :-)

Nah, I'm a Capitalist. How mixed up are you? :-)

[Badger]

Ha and many wonder how gold can make money since it dosnt earn interest.

Well it seems niether does the paper any more...

At least gold retains value...

[Davo36]

GK, didn't you put your money into houses as well?

Surely in any system the smart, hard working and also the criminally minded will take from the others and over time gain more and more of the wealth. The slow of mind, lazy types will eventually wind up with very little. This may be repugnant but how can it be any other way?

David