Today the fed cut short term interest rates by 3/4 of a point, or 75 basis points. I am still in SHOCK that they moved so much. I STRONGLY approve of this move, and have advocated sharp interest rates cuts for a while now (though too damn lazy to post to the blog on this, to my shame!)
The TIMING of this move was to support the markets. The markets in Europe and Asia plummeted yesterday and today, and panic must have been setting in at the fed. But this move (or at least 50 basis points) was surely coming at the scheduled meeting next week in any event. But by rushing this through between meetings, the fed told the markets (1) we get it, the economy is in recession, and we need to move and move big to stimulate a recovery and shorten any recession; (2) that interest rates will end up going even lower than they are now (had the fed not wished to signal this it would have implied that the downward part of the interest rate cycle is over. Instead, the fed in its statement implied the opposite.
http://www.federalreserve.gov/newsevents/press/monetary/20080122b.htm)
Changes in policy by the federal reserve act to change things in the real economy with a time lag of a bit over a year. The fed began cutting interest rates (easing) on September 18th.
http://www.federalreserve.gov/newsevents/press/monetary/20070918a.htm
So the effects of the federal reserve's interest rate moves should begin to be felt sometime late this year or early in 2009. This is depressing, but is a reality of monetary policy. The recession we are likely in is baked in the cake, and there's nothing the fed can do to prevent it, although it has now done a fair bit to ensure that it does not last too long.
Although it seems like the fed is behind the curve, compared to past economic cycles, the fed began cutting quite early in the economic downturn, and has cut quite substantially. The federal funds rate has been cut from 5.25% to 3.5% (1.75 points in total) in 4 months. That is quite brisk and substantial by historical standards. Bernanke cannot be criticized for timidity!!
The fed has moved so significantly despite the dollar's huge fall in recent months, and a bit of inflationary pressures, particularly from the sky-high oil prices. This tells me loud and clear that despite Bernanke's public happy talk (we expect slower growth but not recession) he expects recession, and is willing to risk higher inflation and a weaker dollar to ameliorate it. I'm just speechless with approval.
The FHQ+ Electoral College Projection (10/30/24)
3 weeks ago
7 comments:
Am crying, my boy Fred Thompson
just dropped out of race,
With utterly no enthusiasm I will vote for either McCain or Romney,
but as I live in the Peoples Democratic Republic of California, mu vote wont count anyway
that's ok, I live in the Republican Confederacy of North Carolina, so my vote for Hilarybama won't count either
Bryan,
We must allocate electoral votes to the winner of each congressional
district to allow both of us to escape escape this travesty, agree or disagree?
still wouldn't help my vote, I live in a fairly rural area, unless i get to vote early and often, my vote is meaningless
Believe me boys, we here in New York feel the same way.
And Larry, your PRIMARY vote will certainly count. Especially this year.
By the way Larry, your idea of allocating electoral votes by congressional district has merit, but I doubt it would have changed any elections since 1932. Bush won the majority (bare) of districts in 2000 because Gore ran up the score hugely in very liberal populus districts.
I'm no fan of the electoral college, believe me, but it isn't as devastating as its critics make it out to be.
Danny,
(a) is NY a Republican state, didnt know that?
(b) not voting in primary, am not
a registered Republican, am Independent, but tend to vote Republican, fulling knowing my
firly Democratic parents are frowning down on me from the next life.
Larry:
NY these days is about as reliable a democratic state as there is. It didn't used to be, in fact it used to be a swing state.
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