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hardboiled
12-16-2008, 20:33
http://news.bbc.co.uk/2/hi/business/7786282.stm

It's a trap!

Vessol
12-16-2008, 20:34
Interest rates are slashed and then the hyperinflation begins!

alfaroverall
12-16-2008, 20:35
Why can't the general public borrow from the Fed? I wants a 0.25% interest loan :(

Mordhak
12-16-2008, 20:35
It's not a trap! You can always make more money!

kordoyn
12-16-2008, 20:46
A sure sign of Sav-eding. This is fucking nuts.

stalwart
12-16-2008, 20:55
lmao. yay. zero percent interest.

Carl Ragadamn
12-16-2008, 20:56
When it goes -1% lets all borrow a few billion.

kordoyn
12-16-2008, 20:59
When it goes -1% lets all borrow a few billion.

Why stop at billion, the feds are operating in trillions these days.

Erroneous
12-16-2008, 21:00
The scary thing is that while the target rate was 1% the effective rate has been between 0.10% and 0.50%. They really can't go any lower even with the big headline 75 bp cut.

http://www.newyorkfed.org/markets/omo/dmm/fedfundsdata.cfm

Airius Droc
12-16-2008, 21:39
All I want to know is when are the mortgage rates going to go below 4%?

Ziegler
12-16-2008, 22:07
All I want to know is when are the mortgage rates going to go below 4%?

never...the banks have already refused to lower rates anymore in conjunction with the fed rate. Although...alot of ARM mortages are fixed to the fed rate, which means they should be getting lower payments.

Weeking
12-16-2008, 22:12
Why the fuck are they lowering it? They should've been jacking it up above 10%.

Erroneous
12-16-2008, 22:23
Because central banks conventionally conduct monetary policy by manipulating the short-term nominal interest rate, some observers have concluded that when that key rate stands at or near zero, the central bank has "run out of ammunition"--that is, it no longer has the power to expand aggregate demand and hence economic activity. It is true that once the policy rate has been driven down to zero, a central bank can no longer use its traditional means of stimulating aggregate demand and thus will be operating in less familiar territory. The central bank's inability to use its traditional methods may complicate the policymaking process and introduce uncertainty in the size and timing of the economy's response to policy actions. Hence I agree that the situation is one to be avoided if possible.

However, a principal message of my talk today is that a central bank whose accustomed policy rate has been forced down to zero has most definitely not run out of ammunition. As I will discuss, a central bank, either alone or in cooperation with other parts of the government, retains considerable power to expand aggregate demand and economic activity even when its accustomed policy rate is at zero. In the remainder of my talk, I will first discuss measures for preventing deflation--the preferable option if feasible. I will then turn to policy measures that the Fed and other government authorities can take if prevention efforts fail and deflation appears to be gaining a foothold in the economy.

...

So what then might the Fed do if its target interest rate, the overnight federal funds rate, fell to zero? One relatively straightforward extension of current procedures would be to try to stimulate spending by lowering rates further out along the Treasury term structure--that is, rates on government bonds of longer maturities. There are at least two ways of bringing down longer-term rates, which are complementary and could be employed separately or in combination. One approach, similar to an action taken in the past couple of years by the Bank of Japan, would be for the Fed to commit to holding the overnight rate at zero for some specified period. Because long-term interest rates represent averages of current and expected future short-term rates, plus a term premium, a commitment to keep short-term rates at zero for some time--if it were credible--would induce a decline in longer-term rates. A more direct method, which I personally prefer, would be for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt (say, bonds maturing within the next two years). The Fed could enforce these interest-rate ceilings by committing to make unlimited purchases of securities up to two years from maturity at prices consistent with the targeted yields. If this program were successful, not only would yields on medium-term Treasury securities fall, but (because of links operating through expectations of future interest rates) yields on longer-term public and private debt (such as mortgages) would likely fall as well.

...

In practice, the effectiveness of anti-deflation policy could be significantly enhanced by cooperation between the monetary and fiscal authorities. A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money.

- http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm

r4nge
12-16-2008, 22:23
They are almost out of ammo.

holychicken
12-16-2008, 22:52
I don't get you guys.

You are all financial whizzes who know more than these traders on wall street, yet you are posting on an internet gaming board instead of making gobs of money taking advantage of all these clueless morons on wall street.

Why is that?

Silverhandorder
12-16-2008, 22:56
I don't get you guys.

You are all financial whizzes who know more than these traders on wall street, yet you are posting on an internet gaming board instead of making gobs of money taking advantage of all these clueless morons on wall street.

Why is that?

You are coming in with the wrong argument. A person knowing sound economics does not mean he can make money off of people who don't.

Bissen
12-16-2008, 22:57
When it goes -1% lets all borrow a few billion.

Hahahahahaha I just sharted myself! :lmao:

holychicken
12-16-2008, 23:02
You are coming in with the wrong argument. A person knowing sound economics does not mean he can make money off of people who don't.
Much of making money in the market is about predicting the future. If you know what the good and bad economic decisions better than those currently making money in the market, you should easily be able to out earn most people in the market.

Silverhandorder
12-16-2008, 23:04
Much of making money in the market is about predicting the future. If you know what the good and bad economic decisions better than those currently making money in the market, you should easily be able to out earn most people in the market.

That is not how Austrian economics works. You are talking short term. Long term austrian guys turn out to be better off. Shiff is a great example. He was investing in gold when it cost 300$/oz.

holychicken
12-16-2008, 23:23
That is not how Austrian economics works. You are talking short term. Long term austrian guys turn out to be better off. Shiff is a great example. He was investing in gold when it cost 300$/oz.
So why aren't you on this ship making boat-loads of cash then?

Silverhandorder
12-16-2008, 23:34
So why aren't you on this ship making boat-loads of cash then?

You have to have money to make money. I am still a student. Plus what i described previously is simply saving the value of your money. Austrians last I checked do no speculate. They observe market trends.

holychicken
12-16-2008, 23:57
You have to have money to make money. I am still a student.
Why bother investing money in school if you already know enough to make a killing? Why not take the money you are wasting on a school and invest it? Or do you think the return from an education will be greater long term?


Plus what i described previously is simply saving the value of your money. Austrians last I checked do no speculate. They observe market trends.
Wait, you don't think investing in gold is speculating?

Silverhandorder
12-17-2008, 00:04
Why bother investing money in school if you already know enough to make a killing? Why not take the money you are wasting on a school and invest it? Or do you think the return from an education will be greater long term?


Wait, you don't think investing in gold is speculating?

Investing in gold IOU notes is speculating. Investing in the physical commodity is not. Sure the price may drop or rise but you will never loose what you own.

As I said we can not predict economics period. To claim otherwise is to not have a good base in economics in the first place. We can observe market trends and see how things end up.

Economists should not make money, entrepreneurs should. Investment is never 100% sure. Economist can explain to you why certain market area is bad he can not guarantee you that where you invest you will not loose money.

losinglife
12-17-2008, 06:44
Why can't the general public borrow from the Fed? I wants a 0.25% interest loan :(

fo shizzle... that would be f-n sweet. I wouldnt hesitate to try to get a loan at that point hahah

Killuminati
12-17-2008, 06:47
You are coming in with the wrong argument. A person knowing sound economics does not mean he can make money off of people who don't.

People unfortunately think that knowledge of economics allows you to make money.

Silverhandorder
12-17-2008, 06:51
People unfortunately think that knowledge of economics allows you to make money.

That actually caught me off guards because I don't even know how to explain that.

lafayette
12-17-2008, 14:19
Why the fuck are they lowering it? They should've been jacking it up above 10%.

No way in hell, rates are never going back that high.

Do you know what the interest payment is on $10 Trillion ?!!! :lmao:

Wait... what are we up to now, 11 trillion? 30 trillion?

Fuck i dont even know anymore.



I don't get you guys.

You are all financial whizzes who know more than these traders on wall street, yet you are posting on an internet gaming board instead of making gobs of money taking advantage of all these clueless morons on wall street.

Why is that?

Because we didn't study Keynesian economics?

hardboiled
12-17-2008, 15:28
I don't get you guys.

You are all financial whizzes who know more than these traders on wall street, yet you are posting on an internet gaming board instead of making gobs of money taking advantage of all these clueless morons on wall street.

Why is that?

Economics is not the art of making money and hoarding power, even though most seem to think so. But I'm not an economist, I just read economists' work.



McArdle's Law: Money is weird. Finance is weird.



The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design

holychicken
12-17-2008, 15:33
Investing in gold IOU notes is speculating. Investing in the physical commodity is not. Sure the price may drop or rise but you will never loose what you own.
But if those commodities become worthless, you have lost all value. You don't invest in commodities just to own something, you do it to either protect your money or make a profit.


As I said we can not predict economics period. To claim otherwise is to not have a good base in economics in the first place. We can observe market trends and see how things end up.

Economists should not make money, entrepreneurs should. Investment is never 100% sure. Economist can explain to you why certain market area is bad he can not guarantee you that where you invest you will not loose money.
But entrepreneurs who are investors SHOULD have a good understanding of economics. Actually, I would imagine pretty much all entrepreneurs should have at least a decent understanding of economics or at least employee/work with someone who does. And if you understand the economics of our country better than most. . .and better than the people who run the biggest companies and trade on wall street, then you should be out there making money and not wasting your time and money investing in an education.

holychicken
12-17-2008, 15:38
People unfortunately think that knowledge of economics allows you to make money.
I am no expert, but if you could predict what moves were good and bad for the economy better than the people at the top can, you could simply move money between the DJIA and more safe investments and make an absolute killing.

My point is that it is much more complicated than you guys think it is, which is why you are posting here on a message board, going to school and/or working some relatively (to investment bankers) low paying job instead of being out there making a ton of cash.

This, "just because you know economics doesn't mean you can make money" is nothing more than a copout.

salany
12-17-2008, 15:42
I was recently speaking to my banker, I'm up for renewal, they advised me I should wait till the summer when the fixed 5 year rate might hit 4%. Mind you that is in Canadian.

If rates are good I would even consider a fixed 10 year, just to be safe, I would never want to go through what happened in the 80’s.

Silverhandorder
12-17-2008, 15:43
By your broken logic professors (scientists) should run the country and not politicians. They know better then anyone else. Economics is a skill set. To make money you need other skill sets, economics is not enough. This simplistic thinking is what is holding you back from understanding these things.

Carbonlegend
12-17-2008, 15:45
I don't get you guys.

You are all financial whizzes who know more than these traders on wall street, yet you are posting on an internet gaming board instead of making gobs of money taking advantage of all these clueless morons on wall street.

Why is that?

Don't be insulting because they have opinions that you can not comprehend.

Pumpkin
12-17-2008, 15:49
I am no expert, but if you could predict what moves were good and bad for the economy better than the people at the top can, you could simply move money between the DJIA and more safe investments and make an absolute killing.

My point is that it is much more complicated than you guys think it is, which is why you are posting here on a message board, going to school and/or working some relatively (to investment bankers) low paying job instead of being out there making a ton of cash.

This, "just because you know economics doesn't mean you can make money" is nothing more than a copout.

How much money would you be willing to bet that no one you know will ever get totally wasted drunk? I mean you know the people and you know vomiting and blackouts are bad for them?

Oh, right ... you wouldn't bet on it because people still get wasted even if it is bad for them.

And imagine that, just because I know statistics doesn't mean I will win the lottery.

holychicken
12-17-2008, 15:57
By your broken logic professors (scientists) should run the country and not politicians. They know better then anyone else.
You missed my point. My logic DOES NOT say this. What I am driving at is that your economics theories do not translate to real world economics.


Economics is a skill set. To make money you need other skill sets, economics is not enough. This simplistic thinking is what is holding you back from understanding these things.
There's more than 1 way to skin a cat. Maybe you are right and I exaggerate and you cannot make a killing, but you could certainly be making enough money with sound investment strategies (with your professed knowledge of economics) to make using your time and money on school to be an utter waste.

It is not that I am being simplistic, it is that you are being idealistic and not real world. . .well, maybe you recognize that your stance is does not apply in the real world and that is why you are learning instead of doing.

holychicken
12-17-2008, 16:03
How much money would you be willing to bet that no one you know will ever get totally wasted drunk? I mean you know the people and you know vomiting and blackouts are bad for them?

Oh, right ... you wouldn't bet on it because people still get wasted even if it is bad for them.

And imagine that, just because I know statistics doesn't mean I will win the lottery.
I fail (edit)to see how this applies to anything I have said. I am talking about applying their professed superior knowledge of economics. Applying knowledge of statistics would be avoiding the lotto because you know it be a fool's bet.

Basically, this thread is just proving my point. The understanding of economics is purely academic. Academics != real world. If economics is anything like my field, getting out there and getting your hands dirty really shows how little the theoretical actually helps you.

Silverhandorder
12-17-2008, 16:07
You missed my point. My logic DOES NOT say this. What I am driving at is that your economics theories do not translate to real world economics.

The do! 100% in fact. What you do not understand is that Austrian economics do not promise you the world. They simply explain how it works.

Debt is bad right? The way government is running at 10 trillion dollars was with the blessing of all main stream economists. The current account explanation makes zero sense but we somehow choose to go with that system.

What you are having hard time seeing is that you are asking us to trust people who give no explanation to what they do. They explanations they do give are based on assumptions that are 100% false.


There's more than 1 way to skin a cat. Maybe you are right and I exaggerate and you cannot make a killing, but you could certainly be making enough money with sound investment strategies (with your professed knowledge of economics) to make using your time and money on school to be an utter waste.

It is not that I am being simplistic, it is that you are being idealistic and not real world. . .well, maybe you recognize that your stance is does not apply in the real world and that is why you are learning instead of doing.

Lets get something straight here. You don't know anything about me or any other forumfaller here. To give us suggestions how to run our lives is kind of silly.

Now that that is behind for me personally I figured that I will get a much bigger pay off should I go for a high paying job. I could go right after high school and do a physical job which pays me 3 times less then my target job. It takes me 9 years to become a doctor. In 3 years that I am a doctor I can have earned just as much as me working my ass off at construction, lifts or any other primary education job. Yes I can choose right now to start saving up money and making different investments for my retirement. The difference mostly is what type of work I am willing to do. I worked before and I am not going to settle for any of the small stuff if I can help it.

holychicken
12-17-2008, 16:18
The do! 100% in fact. What you do not understand is that Austrian economics do not promise you the world. They simply explain how it works.

Debt is bad right? The way government is running at 10 trillion dollars was with the blessing of all main stream economists. The current account explanation makes zero sense but we somehow choose to go with that system.

What you are having hard time seeing is that you are asking us to trust people who give no explanation to what they do. They explanations they do give are based on assumptions that are 100% false.
I am not asking you to do anything. I just think the system is far more complicated than you want it to be. I understand your stance idealistically, but as I said, idealism and reality are not the same.


Lets get something straight here. You don't know anything about me or any other forumfaller here. To give us suggestions how to run our lives is kind of silly.
I am just pointing out the obvious, if you know better than the people at the top, from a very basic and real world economics point of view, using your time (especially considering the earlier, generally, the better) and money on school is a waste. Do what you like, I could care less, I just wonder how it makes economic sense to be wasting your time and money.


Now that that is behind for me personally I figured that I will get a much bigger pay off should I go for a high paying job. I could go right after high school and do a physical job which pays me 3 times less then my target job. It takes me 9 years to become a doctor. In 3 years that I am a doctor I can have earned just as much as me working my ass off at construction, lifts or any other primary education job. Yes I can choose right now to start saving up money and making different investments for my retirement. The difference mostly is what type of work I am willing to do. I worked before and I am not going to settle for any of the small stuff if I can help it.
I am not sure if this is hypothetical or not (are you going to be a doctor?) and I agree with you, the smart bet (unless you have hit something early on) is to go to school, get an education and then start applying your education. I am not saying you are doing a bad thing. But, if you are being a doctor, I would assume you are not majoring in economics. What would lead you to believe that you know better than the experts who have years of making money, by managing money in the real world economy?

Lethn
12-17-2008, 16:20
Have you noticed that every SINGLE government official or leader that has talked about this issue has completely avoided the idea of actually cutting ordinary taxes and not interest rates?