Watching the economy is fun, admit it.
I look forward to Mondays lately. In a materialistic world what is more salient than the economy.
Reuters: Fed cuts to mark pre-Xmas trading
One area from where help is almost certain to come, however, is the Federal Reserve, which meets on Tuesday. The U.S. central bank is widely expected to slash interest rates by as much as 75 basis points to just 0.25 percent.
But the issue is also arising -- and not just in the United States -- of what happens when rates are so low that they cannot be cut anymore.
4 comments:
My sense is that these little tweaks like this .75% drop are designed to keep the market from going down further. They are trying to bridge the recession with little flourishes to keep the market from collapsing further.
They have a little bag of tricks to try to keep hope alive and the problem here is that with the interest rate after the cut at .25% there's not much more room for this little trick. As you say it failed in Japan. Its also designed to give people a little pre-Christmas bump on their portfolios that are now anywhere from 35% to 75% lower in value unless they were invested in something like Lehman Bros. then forget about it, gone.
Come mid-February, with unemployment approaching double digits, it will be interesting to see what they pull out. I suspect it will be Obama's new deal stimulus package. When that comes out, that will also bridge a period of time to keep a sense of stability alive.
In truth it about creating a positive emotional face for the investment class because as you say behind the face people are busted or holding onto any cash they have, if any.
In a deflation the problem is over supply and no demand. The best way to get people spending is to either create jobs or give them $$ too spend in the hope this will jump start the moribund private economy. The worry of many folks is if u just hand the States money they'll just hire more non-productive State employees to do non-jobs. What's needed are REAL jobs not make work jobs. A few hundreds of thousands of jobs for pols buddies and families isn't going to work.
When Jimmy Carter tried his version of the new deal, he started a community arts program.
Artists got hired to make murals and to put on plays, workshops etc.
I'll never forget it. A lot of the people hired were actually from very wealthy families while someone like me who came from a blue collar family didn't. It was very strange, the people who needed the work the least got the jobs and most poor kids didn't. The director chose people like themselves, highly educated and well off.
When Obama puts out his new deal, I will bet the same thing happens. There will be favoritism, kick backs and kiss ups. Merit and talent will be trumped by partisanship of the personal kind.
Job creation, I say tax cuts for the poor and middle class only, lower mortgage interest rates, increase the deduction for home ownership beyond interest, increase the regulations with credit cards and such to keep banks from vulturism, increase spending to schools with scholarships to state schools, increase funding to state schools to lower tuition, offer rewards for innovation in energy and sustainability innovation including access to money for innovative start up businesses, somehow get money flowing into the housing market because the infrastructure in America is substandard and old. There's tons of jobs in the housing market because the amount of work needed to get housing up to efficiency standards is mind boggling. I see it everyday. Make it interesting an exciting to actually care about your community and its visual and societal health.
Somehow credit has to get loosened up a little bit more, we are getting flack from the credit investigators and we have 800 credit scores! What is up with that.
Then, then there's health care - yikes.
Oh yeah one more thing, cut the freeking military budget already. And let's get out of the everybody in endless war business. Stop running the American economy through the Pentagon.
The defense thing has been out of hand for decades. Slap defense on whatever ur selling and get a pol to back it and ur in. Many companies are totally dependent on Gov't contracts and in my view are quasi-state enterprises already. I worked for 3 who only existed off of FAA contracts. Without them they would have folded in 5 mins.
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