Post by: The Rabbi on January 10, 2008, 09:02:16 AM
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WASHINGTON - Federal Reserve Chairman Ben Bernanke pledged Thursday to slash interest rates yet again to prevent housing and credit problems from plunging the country into a recession.
The Fed chief made clear the central bank was prepared to act aggressively to rescue a weakening economy. "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," he said.
see more in the story.The Fed chief made clear the central bank was prepared to act aggressively to rescue a weakening economy. "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," he said.
The Fed's job is not to rescue the economy. That is Congress' job. The Fed's job is to insure price stability and the value of the dollar. With oil and gold, traditional proxies for inflation, going through the roof, the Fed ought to be concerned with inflation.
This was the exact path Arthur Burns went down and it ended with the worst inflation and stagnation in U.S. economic history.
Post by: MrRezister on January 10, 2008, 09:23:01 AM
Post by: Finch on January 10, 2008, 10:13:02 AM
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Federal Reserve Chairman Ben Bernanke pledged Thursday to slash interest rates yet again to slow housing and credit problems from inevitably plunging the country into a recession.
Fixed.Damn, if only we had a presidential candidate who actually saw this as a bigger threat to our nation than "TERRORIST WHO HATE OUR FREEDOMS!!11 OMGWEAREGOINGTODIEWITHOUTTHEWARONTERRAH!!!"
I'm glad we made that tough decision to destroy our economy to do whatever it is that we are doing. Excellent choice.
Post by: The Rabbi on January 10, 2008, 10:21:56 AM
Post by: Finch on January 10, 2008, 10:27:42 AM
I dont know that a recession is inevitable. But we are at that point in the business cycle where excess needs to be wrung out. The solution is for the gov't to cut taxes and get out of the way.
Maybe not inevitable, but they keep adding straws and are getting pretty damn close to breaking it's back.
Post by: Manedwolf on January 10, 2008, 10:52:31 AM
The more he says it's weak, the weaker it will get. Can we say "Self-fulfilling prophecy"?
Post by: French G. on January 10, 2008, 01:06:05 PM
I don't see the war has hurt the economy, they usually help.
What has hurt the economy is really not much except expectations. We couldn't lose money on real estate, everybody was flipping house, stocks are safe, it's the new economy, we can now avoid recession, etc, etc. The only real damage has been done by the usual Greenanke "I have a printing press and I'm not afraid to use it" approach to monetary policy.
Post by: Perd Hapley on January 10, 2008, 02:45:14 PM
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Who Put This Clown In Office?
Why the other clown in office, of course. (And I don't mean Mike Irwin.)
Post by: Finch on January 10, 2008, 02:51:46 PM
I don't see the war has hurt the economy, they usually help.
They may help certain industries, but the overall economy gets screwed when you borrow billions a week and "lower interest rates" to finance said wars.
Post by: Paddy on January 10, 2008, 03:07:41 PM
How about ending the occupation of Arab lands by the U.S. military, Mr. Bush?
Post by: Headless Thompson Gunner on January 10, 2008, 03:18:50 PM
Post by: Finch on January 10, 2008, 04:24:02 PM
Bernanke is erring on the safe side, as he should.
Tell me how adding more currency to an already saturated market is safe? How do you solve the problem of inflation with more inflation?
Post by: Headless Thompson Gunner on January 10, 2008, 04:29:59 PM
Bernanke is erring on the safe side, as he should.
Tell me how adding more currency to an already saturated market is safe? How do you solve the problem of inflation with more inflation?
Post by: Tecumseh on January 10, 2008, 04:47:33 PM
Post by: The Rabbi on January 10, 2008, 05:11:48 PM
Bernanke is erring on the safe side, as he should.
Tell me how adding more currency to an already saturated market is safe? How do you solve the problem of inflation with more inflation?
OTOH, all the inflationary signals are there, flashing red.
No, the Fed is not paying attention to inflation or deflation. They are paying attention to jobs and economic activity and trying to "rescue the economy" with easy money. This is a formula for failure.
Post by: Nitrogen on January 10, 2008, 05:13:40 PM
Post by: French G. on January 10, 2008, 05:21:09 PM
They may help certain industries, but the overall economy gets screwed when you borrow billions a week and "lower interest rates" to finance said wars.
We are not borrowing "billions a week" to finance a war. That money, much less than billions a week, is allocated by defense spending bills and the federal budget. Interest rates being lowered have zip zero to do with the war. Short term interest rates are being lowered to encourage more extending of credit by and between large financial institutions.
HTG, I believe major inflationary pressures are at work because any official calculation of inflation ignores food and energy. Well energy costs are driving the food costs($5 gallon of milk) and a paycheck gets a lot less than it did a year or two ago. Drive down consumer confidence, people pull back in their shell, Fed lowers rates some more to encourage spending, money gets less useful. I suppose next we will see the "oil bubble" in the stock market and oil's eventual price fall will get blamed for jerking the economy around. Last February I though we'd be recovering by now, but I was wrong, the level of denial in the financial markets is dragging the larger economy down. Oh well, my pitiful stock portfolio is nothing but speculative gold and oil stocks right now, so I await more bad news.
Post by: longeyes on January 10, 2008, 06:13:19 PM
What's good for Goldman Sachs is good for America. Let's not forget that.
Post by: Headless Thompson Gunner on January 10, 2008, 06:39:20 PM
Housing costs form one of the largest expenses in the average American household's budget, and those are falling precipitously. All signs indicate that they'll continue to fall.
I think the Fed is just now starting to get firm data on just how much liquidity got sucked out of the market when the bubble burst. I don't think they like what they're seeing.
The defensiveness of the lending industry is only going to compound all of these problem.
Right now, it looks as though high oil and metals prices are all that's propping prices up. Yet those commodity prices have as much to do with speculation in the futures markets as they do any real increase in cost. I'm hearing more and more average people, people who don't really understand or follow the markets, talk about commodity futures as if they easy risk-free investments with guaranteed high returns. That sort of sentiment among the general population is one of the first indications that a bubble is forming. Given the highly leveraged nature of most of those investments, a panic sell situation is creepily plausible. That could severely exacerbate disinflationary problems.
Back in the late '80s Japan experienced the synergistic effects of cheap foreign goods, lower manufacturing wages, a real estate bust, and a lending industry that was scared to lend. (Sound familiar?) Deflation set in and wrecked their economy. Their central bank couldn't fix it, not even by cutting rates to 0%. Their economy still hasn't fully recovered.
Still think there's no reason to fear deflation?
Inflation isn't ideal, but at least it's tolerable, at least it can be managed somewhat by the Fed. Deflation is disastrous. It wrecks an economy and can't easily be reversed. We're far better off taking the risk of inflation rising a point or two in the short term if it ensures we won't fall into a depression.
Bernanke and the FOMC did the right thing.
Post by: The Rabbi on January 11, 2008, 01:36:01 AM
The Fed is not paying attention to the money supply, which has been growing steadily over the last 12 months. How do you have an increasing money supply and deflation? You don't.
Post by: Paddy on January 11, 2008, 08:56:18 AM
The basic problem IMO, is that we're a consumer based economy. Every year the news reports how retailers are wailing and gnashing their teeth over Christmas sales, like we're supposed to care. If there are too many of them for the rest of us to support, let 'em go out of business, for all I care.
A consumer based economy needs money in order to consume. In order to get money, you have to produce something of value. We don't produce nearly enough for our size, and that's why we're a debtor nation. Unless this changes, it won't have a good end.
Post by: The Rabbi on January 11, 2008, 09:40:35 AM
Let's start with recession. A recession is not a contracting of money supply. A recession is a decline in GDP for some number of consecutive quarters, three maybe.
The Fed can fiddle with interest rates but unless there is business confidence no one will be interested in borrowing money to build or expand a business. Japan experienced this when their rates fell to essentially zero and lending didnt pick up.
Post by: Paddy on January 11, 2008, 10:33:20 AM
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A recession is not a contracting of money supply. A recession is a decline in GDP for some number of consecutive quarters, three maybe.
That's the Cliffsnotes version.
Negative GDP growth is a symptom of an underlying problem(s). The causes include contraction in the money supply (tight money), unemployment (lowering demand), decline in consumer confidence, oil prices, war, artficially low interest rates, and other factors. A huge decline in the money supply accompanied the Great Depression because Panicked people withdrew all their money from the banks. Less money means less production. Tight money was also responsible for more recent recessions.
Post by: The Rabbi on January 11, 2008, 10:34:49 AM
Post by: Paddy on January 11, 2008, 10:51:02 AM
Post by: Tecumseh on January 11, 2008, 11:17:29 AM
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Federal Reserve Chairman Ben Bernanke pledged Thursday to slash interest rates yet again to slow housing and credit problems from inevitably plunging the country into a recession.
Fixed.Damn, if only we had a presidential candidate who actually saw this as a bigger threat to our nation than "TERRORIST WHO HATE OUR FREEDOMS!!11 OMGWEAREGOINGTODIEWITHOUTTHEWARONTERRAH!!!"
I'm glad we made that tough decision to destroy our economy to do whatever it is that we are doing. Excellent choice.
What if we used the money spent on Iraq fixing their economic problems, to fix our own?
Post by: Paddy on January 11, 2008, 02:06:55 PM
Post by: crawdaddyjim on January 11, 2008, 08:01:03 PM
I think most of this recession talk is a direct result of democratic presidential candidates stating they are going to raise taxes. And start another round of class warfare ala F. Roosevelt in 1937.
Post by: Paddy on January 11, 2008, 08:21:19 PM
No. Here's what needs to happen:
1) Raise the minimum wage to increase the purchasing power of millions. This will increase demand, and thus production.
2) Bust up the oil companies under Sherman anti trust laws. This will create more competition and lower gas prices. High gas prices are very inflationary and destructive to the economy.
3) Raise taxes on the uber wealthy to take the burden off the working middle class.
4) Abandon the 'war' in Iraq (which is really an occupation). Bring the troops home and declare "Mission Accomplished" (oh, wait that's already been done)
5) Print only enough money to keep pace with growth and no more
5) Stop lowering interest rates in order to encourage borrowing. It's artificial and destructive. Let the market seek its own level.
and some other stuff.
Post by: crawdaddyjim on January 11, 2008, 08:39:40 PM
Get a copy of "The forgotten man" by Amity Schleas. It might just open your mind a little.
Post by: Paddy on January 11, 2008, 09:01:34 PM
We tried that in 1934. Didn't work then and won't work now.
Get a copy of "The forgotten man" by Amity Schleas. It might just open your mind a little.
Get a copy of "The forgotten man" by Amity Schleas. It might just open your mind a little.
Uh-huh. More corporatist apologetics. I heard it all before, about how that 'eeevil' FDR actually used federal money to help the little guy who was unemployed and hungry. Can't have any of that. Not good for the shareholders dontcha know.
Post by: WeedWhacker on January 12, 2008, 12:06:32 AM
Yeah. 'Trickle down economics'. That really worked the first time. :rolleyes:
No. Here's what needs to happen:
1) Raise the minimum wage to increase the purchasing power of millions. This will increase demand, and thus production.
No. Here's what needs to happen:
1) Raise the minimum wage to increase the purchasing power of millions. This will increase demand, and thus production.
Whaaaat? Stop. Just stop right now.
Mandating an increase in labor costs means increased costs for businesses. Those costs do NOT magically go away, they are passed on to the customer. By raising the federal minimum wage, the gov't is raising prices across the board.
Post by: French G. on January 12, 2008, 03:52:40 AM
How about we leave the evil oil companies alone to make some money. In the interest of making more they will maybe do some exploration to find more money in the ground.
Trickle down economics worked pretty damn good the first time. We recovered from the 70's and by the time Clinton showed up to take credit for the economy it was roaring.
Post by: seeker_two on January 12, 2008, 06:33:01 AM
The rest is a recipe for disaster......
Post by: Fly320s on January 12, 2008, 08:22:57 AM
I'm not too concerned about the short-term, say less than 5 years, economy. That will work itself out, regardless of what we do now, as I think that die is cast.
As for the long term solution, what I would like to see is a better economic education in all levels of school with a focus on individual fiscal responsibility. Teach the kids that if they want to have all the toys, then they have to work for them as no one will give them handouts. Teach the kids how to save and budget in order to be able to afford that 50 inch plasma TV. Teach them that at some point in their lives, they will need that rainy-day fund to save their house from being foreclosed.
The people today don't want to save and budget. They want the big house, big car, big TV now, not next year. Which is all well and good, except that those people have run-up their debt so high that they are living paycheck to paycheck even though they earn $80k per year. I see it everyday at work. They expect their new house to increase in value at a huge rate so they can borrow against their equity to buy more stuff. But when the house decreases in value, or their mortgage rate increases, then they say, "Help me, big government!" because they haven't saved a dime.
Enough. People need to learn patience. If they want to be rich, they need to realize that it will take a lifetime of earning, saving, and investing to get there. If they want to buy everything today, then they need to realize that they will have no money tomorrow.
Back to basics.
Post by: The Rabbi on January 12, 2008, 04:01:34 PM
Yeah. 'Trickle down economics'. That really worked the first time.
No. Here's what needs to happen:
1) Raise the minimum wage to increase the purchasing power of millions. This will increase demand, and thus production.
2) Bust up the oil companies under Sherman anti trust laws. This will create more competition and lower gas prices. High gas prices are very inflationary and destructive to the economy.
3) Raise taxes on the uber wealthy to take the burden off the working middle class.
4) Abandon the 'war' in Iraq (which is really an occupation). Bring the troops home and declare "Mission Accomplished" (oh, wait that's already been done)
5) Print only enough money to keep pace with growth and no more
5) Stop lowering interest rates in order to encourage borrowing. It's artificial and destructive. Let the market seek its own level.
and some other stuff.
No. Here's what needs to happen:
1) Raise the minimum wage to increase the purchasing power of millions. This will increase demand, and thus production.
2) Bust up the oil companies under Sherman anti trust laws. This will create more competition and lower gas prices. High gas prices are very inflationary and destructive to the economy.
3) Raise taxes on the uber wealthy to take the burden off the working middle class.
4) Abandon the 'war' in Iraq (which is really an occupation). Bring the troops home and declare "Mission Accomplished" (oh, wait that's already been done)
5) Print only enough money to keep pace with growth and no more
5) Stop lowering interest rates in order to encourage borrowing. It's artificial and destructive. Let the market seek its own level.
and some other stuff.
This is exactly the recipe that Obama and Hillary have for the country. Are you sure you aren't a DNC operative?
Post by: crawdaddyjim on January 12, 2008, 05:15:56 PM
We tried that in 1934. Didn't work then and won't work now.
Get a copy of "The forgotten man" by Amity Schleas. It might just open your mind a little.
Get a copy of "The forgotten man" by Amity Schleas. It might just open your mind a little.
Uh-huh. More corporatist apologetics. I heard it all before, about how that 'eeevil' FDR actually used federal money to help the little guy who was unemployed and hungry. Can't have any of that. Not good for the shareholders dontcha know.
Most shares in the U.S. Markets are owned by "The forgotten Man". You have no clue. The middle class has the largest stake in corporate America. His job, his retirement are a direct relationship. We cannot as a economy both work for and pay to the gov't. It is profit negative. Just ask the Communists in the USSR.
There is no FREE Lunch. Only consumers pay taxes. Unions are parasites on the working man.
Post by: stephpd on January 13, 2008, 09:06:18 AM
Everyone hear talks a game, good or bad, and it's all bs. The stock market is worse then a craps game. Pure gambling and speculation.
Post by: Manedwolf on January 13, 2008, 10:21:49 AM
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3) Raise taxes on the uber wealthy to take the burden off the working middle class.
Post by: Dntsycnt on January 13, 2008, 10:44:53 AM
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5) Stop lowering interest rates in order to encourage borrowing. It's artificial and destructive.
Riley, aren't the other things you listed (aside from 4 & 5) also artificial and destructive?
Post by: LAK on January 16, 2008, 03:39:28 AM
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We are not borrowing "billions a week" to finance a war. That money, much less than billions a week, is allocated by defense spending bills and the federal budget.
And who is paying the interest on the "federal budget" - or has the national debt been paid off while I was not looking?You can not maintain an ongoing line of credit costing you x in interest payments and claim that a portion of your earnings is "paying the rent with no borrowing".
When you have no debt, then you can brag about what income is paying for what.
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