Fed cuts rates to ZERO percent, begins flooding market with money

[theotherguy]

The Federal Reserve's decision to cut its target for short-term interest rates to as low as zero reflects the reality of a central bank scrambling to apply a new set of monetary tools to battle the deepening recession.

?These are extraordinary times that call for extraordinary measures,? said Robert McTeer, former president of the Dallas Federal Reserve Bank.

In an unprecedented move, Fed Chairman Ben Bernanke and his colleagues Tuesday set a new target range for overnight lending between banks at zero to 0.25 percent, down from the previous target of 1 percent.

With short-term interest rates already close to zero, the Fed has been moving to a strategy known as ?quantitative easing? ? essentially dumping money into the economy to make credit easier to get. Early in his tenure as a board member, Fed Chairman Ben Bernanke described the policy by likening it to dropping money from a helicopter, a speech that earned him the nickname ?Helicopter Ben.?

?The (target interest) rate is the least important issue right now,? said Diane Swonk, chief financial officer of Mesirow Financial. ?It will be the alternative actions ? the helicopter in the sky and how much money they're going to drop from the helicopter.?

Under normal circumstances, this flood of government spending and asset purchases by the Fed would pose a major risk of inflation. Economists say that long-term threat is very real. But for the moment, the ongoing drop in prices of assets like housing and stocks to commodities like gasoline has pushed that inflation risk into the future.

At some point, once the economy begins to recover, the Fed will face yet another monumental challenge: how to drain trillions of dollars of excess cash from the economy to avoid a new bout of inflation or another credit bubble. If it starts draining money too soon, it risks throwing the economy into another slide. That means the Fed?s outsized role in managing the economy with its new strategy will likely remain in place for some time to come, according to Credit Suisse chief economist Neil Soss.

?There is no exit strategy from this entanglement, anywhere,? he wrote in a note to clients this week.

This is very VERY bad. Remember Zimbabwe? Remember Germany during the Great Depression? The government has run out of options, and is now printing new money. In the short term, this will get credit going again, but in the long term, it could mean hyperinflation.

 

[Bob_Marley]

Looks like Uncle Bob has found himself a new job!

 

[Pesmerga]

Yup, we're all ****ed.

 

[PvtRyan]

As a kid, I always thought they should just print some more money when there wasn't enough of it. Apparently, I could have gotten a job as a financial expert.

 

[Escaep]

Looks like Uncle Bob has found himself a new job!

Do you mean Uncle Sam?

 

[Top Secret]

As a kid, I always thought they should just print some more money when there wasn't enough of it. Apparently, I could have gotten a job as a financial expert.

HAHAHHAHAHA

This!

 

[jverne]

it so funny how the FED has America by it's balls...and there's nothing you can do about it. lol

 

[ThunderDawg]

All the money the government prints is based on credit. All others things
being equal, if there were no credit, there wouldn't be any money.

 

[Krynn72]

Great to see democracy at work.

 

[Bob_Marley]

Do you mean Uncle Sam?

No, Uncle Bob.

 

[Kula Meenur]

HYPER...HYPER...HYPERINFLATION





/commences hardstyle music






seriously though, what a heeee-uuuuuuge ****up.

 

[Raziaar]

Back in my day soda cost five bucks a can. Only five bucks a can! And we used to walk uphill to work in the rapidly rising flood waters. You kids have it easy these days.

 

[Eejit]

Invest in wheelbarrows guys!

 

[Operational]

Back in my day soda cost five bucks a can. Only five bucks a can!

"Bucks", sure you don't mean cents?

 

[Seppo]

Or buicks?

 

[Escaep]

No, Uncle Bob.

Never heard of him.

 

[Raziaar]

"Bucks", sure you don't mean cents?

I'm speaking to future Americans... so I mean dollars.

 

[Bob_Marley]

Never heard of him.

Robert Mugabe, Marxist terrorist, runs Zimbabwe. Put the economy there down the tubes by printing insanely large amounts of money.

 

[No Limit]

This is very VERY bad. Remember Zimbabwe? Remember Germany during the Great Depression? The government has run out of options, and is now printing new money. In the short term, this will get credit going again, but in the long term, it could mean hyperinflation.

Isn't the problem we are now having that we are suffering deflation? None of this makes sense to me, but it would seem that the FED has nothing to lose with this since we are going through deflation anyway.

 

[Raziaar]

Inflation sucks balls... there's more money but it's not like we're earning more money to keep pace with it.

 

[Escaep]

Robert Mugabe, Marxist terrorist, runs Zimbabwe. Put the economy there down the tubes by printing insanely large amounts of money.

Oh right, i have heard of that dude just never as Uncle Bob. :cheers:

 

[Mr Stabby]

Isn't the problem we are now having that we are suffering deflation? None of this makes sense to me, but it would seem that the FED has nothing to lose with this since we are going through deflation anyway.

The credit contraction isn't deflation. Amerca has had high inflation for most of Bush's time in office. The crontraction in credit isn't due to a decrease in the overall money supply but because banks are refusing to lend the money, so it's essentially the same as taking your money out of the bank and putting it under your matress, it's still legal tender but out of the credit supply.

 

[No Limit]

The credit contraction isn't deflation. Amerca has had high inflation for most of Bush's time in office. The crontraction in credit isn't due to a decrease in the overall money supply but because banks are refusing to lend the money, so it's essentially the same as taking your money out of the bank and putting it under your matress, it's still legal tender but out of the credit supply.

But from what I've been reading inflation has in fact been dropping at record amounts:

http://online.wsj.com/article/SB122943374481010287.html?mod=googlenews_wsj

I would assume this has more to do with the drop in oil prices and construction than what is happening in the credit markets, but most of this stuff is way over my head.

 

[G(ordon)-man]

It's no inflation in here! Only cocktails and women!


hell no

 

[Mr Stabby]

But from what I've been reading inflation has in fact been dropping at record amounts:

http://online.wsj.com/article/SB122943374481010287.html?mod=googlenews_wsj

I would assume this has more to do with the drop in oil prices and construction than what is happening in the credit markets, but most of this stuff is way over my head.

There is still inflation, it's just not as bad as it was, at the height of those high oil prices it was about 6% now it's closer to 1%.

 

[99.vikram]

So how long until bananas become the new US currency?

 

[Mr-Fusion]

Zimbabwes inflation is at 13 billion percent. Everything doubles in price every 2 weeks.

Americans, you better start re-learning how to grow crops in your backyard as the Zimbabweans do. Things are going to get worse.

When the shit hits the fan here i'm going bush. I will eat grubs and live off the land. **** you civilisation. You had your chance.

Men of the stoneage worked 9 hours a week on average.

9 HOURS A WEEK

How many hours a week do i work? Well over 15 hours!!!!! It's a disgrace.

 

[nipples]

So how long until bananas become the new US currency?

I give it a month.

 

[kirovman]

Printing money was very successful for the Weimar Republic.

Zimbabwes inflation is at 13 billion percent. Everything doubles in price every 2 weeks.

Americans, you better start re-learning how to grow crops in your backyard as the Zimbabweans do. Things are going to get worse.
.

Don't worry, Americans can just do what Zimbabweans do and ..err, hoard dollars. No, wait.

 

[The Monkey]

A professor in economic history told me something very interesting about a month ago. For decades there have been a huge trade deficit in the US; they've been importing far more than they've been exporting. When imports and exports are equal, the flood of money in and out of the country is more or less the same.

Now, as Americans have been importing so much, the flood of dollars out of the country has been much large than the flood of money in. (Since they bought the products and services with dollars.) Billions upon billions of dollars are currently in the hands of China, India, Japan, Brazil, Saudi Arabia, etc.

If these countries decide to sell their dollars, the same thing will happen to the dollar happens to anything if that gets an increase in supply but no increase in demand: the price will drop, big time. As a result, the US economy will more or less collapse. So these nations, China, India, etc. have the capability to wreck the US economy and has thus a huge bargaining advantage, and will use this to gain more influence in the World Bank, the IMF, or even in political issues, such as Taiwan. So the ability of Barack Obama to keep his election promises about the economy is directly dependant of if the communist party in China allows him to. Now a very optimistic picture, is it?

 

[Pesmerga]

Foreign stakes pale in comparison to the cumulative private debt held by American corporations. Not that foreign influence isn't hurting- most foreign economies are simply withdrawing from the dollar in an effort to minimize damage caused by American economic collapse.

There's little we can do- only hope that we can soften the blow and help rebuild the economy to be more powerful than was before.

 

[unozero]

Zimbabwes inflation is at 13 billion percent. Everything doubles in price every 2 weeks.

Americans, you better start re-learning how to grow crops in your backyard as the Zimbabweans do. Things are going to get worse.

When the shit hits the fan here i'm going bush. I will eat grubs and live off the land. **** you civilisation. You had your chance.

Men of the stoneage worked 9 hours a week on average.

9 HOURS A WEEK

How many hours a week do i work? Well over 15 hours!!!!! It's a disgrace.

do us all a favor go live in the bush right now.