Money – The Federal Reserve lowers the target on a key short-term interest rate for the first time in four years from 5.25% to 4.75%
If the banks weren't so greedy and stopped stealing legally, this would not be necessary!! The banks could keep the mortgage rates the same and steal a little less money!
Ordinarily I would agree with you but the subprime mortgage implosion in your country has had its effects around the world with governments ploughing money into the banking sector to prevent a collapse.
A case in point is Northern Rock in the UK. The UK government is throwing dollars at it to stop it from going under, all the while assuring account holders that there's nothing to worry about. Needless to say there are lengthy queues of worried account holders outside branches trying to get their money out.
The funny thing is, many of us, myself included, could see this coming for around the past 4 years. Your Federal Reserve fiddling the interest rates has simply delayed it. This cut is probably one of the worst things to be done to solve the crisis but it's just another delaying measure.
Where are all the proponents of laissez faire economics now? It just goes to show just how much your economy is actually manipulated and controlled.
skeek: The people who were so openly ready to enjoy the profits are now crying about their losses. What amazes me is why people fell into the housing pyramid scheme so easily. Common sense says if it seems to good to be true it usually is. Why is it that people don't understand that wealth is not accumalated over night honestly. Bush must still believe in supply side economics. I feel for the people who are getting hurt by this. It will end up being everyone but the priveledged few.
You're right, cowboygrandpa. You can't spend what you don't have, or if you do, it's going to have to be repaid and then a whole lot more.
I'm no economist but I get the impression that by making money so readily available to people who had next to no hope of ever repaying it, it created the illusion of a thriving economy because it kept the housing industry and property markets busy, busy, busy with work and jobs. And this is something that matters in opinion polls and at the ballot box. Especially when you've got an unwinnable war grinding it down. But all that momentum driven by hoopla is coming to a grinding halt, not just in America, but in other places such as the UK and Australia, which have both been riding on the same wave.
I haven't read Greenspan's book, but from what I've heard of it, he is running as fast as he can from the fast burning fuse of Bush's economic bomb. Now the man is saying things I can agree with. Like interest rates should be going up, not down.
Some parts of the above discussion are good and some are not. It is true that too many people were given loans that were so back loaded they could not pay when the first increases in payments hit. That is the fault of the greedy lenders trying to make more and more money from origination fees and initial payments of interest.
On the other hand this should not be effecting those who can pay a conventional fixed rate or even a standard based ajustable as differentiated from these sub-prime no down, no proof of income, interest only type loans.
Unfortunately the banks and lenders will be bailed out. It may not be that bad if it causes new rules to prevent the abusive lending practices. Basically this will not effect my family. All loans for myself and three childrens families are standard conventional, jumbo, or FHA adjustables and nobody has problems paying because the loans all required proof of ability to pay before they were issued.
Lenders went too far they suffer.
Well everyone can get ready to get mad at me because this is a dumb move. AT times in my business I have had a few good years and this meant I had a tax problem so I used loop holes to avoid taxes, but after maybe 3 years you run out of options and have to pay the taxes which now could be a greater bill than if one hadn't avoided them to start with. The point is that the piper has to be paid and keeping this going will cause more pain in the long run. For those who think this will help the ordinary joe, sorry anytime I hear the stock market cheer I know that it will likely cost the average person more. The point here is lower rates means more money in circulation which likely will lead to inflation on two fronts, one being a lower American dollar and the second being no one is going to curb thier spending.
I really don't think this will hurt the average working stiff. His variable rate loans and credit card rates SHOULD go down, and those with decent jobs may be able to refi out of those teaser loans into something more manageable.
The super fat cats may earn less on the millions they have in CD's, but they should clean up on the short term stock market gains.
But I'm a bus driver, what do I know?
Well I am a IT professional and a part time University Professor with a masters degree in business. Let me say you know plenty and I wish those who took those abusive loans had your intelligence. If they did they would not have taken loans with no chance of ever repaying and we would not be in this mess today.
They should have the banks (who have been posting record profits) pay the difference caused by their short-sighted lending schemes.
Actually for the most part the banks has stuck with standard conventional and jumbo loans. They may have a small exposure to sub-prime market but not that much.
The real problem is all those non-bank mortgage lenders who had to devise the abusive type loans to continue in business. Banks did not need to do that cause they had other types of lending and deposit business and fees to bring in profits even if they were not making so many mortgage loans.
Bernanke did the right thing, but he waited too long, until the whole housing industry came to the edge of collapse.
These guys ought to get off their duffs and try to come into the 21st century real fast!
Their lazy practice of waiting for their next meeting - 2 weeks, 4 weeks, whatever! - doesn't do much until the horse has gone out of the barn! The world economy doesn't wait for their fat bottoms to become mobile again! These guys should be willing to sprint instead of acting like a tug boat waiting for the tide!
Wake up, Benny!
I didn't know you were so in love with inflation, and a collapsing dollar.
Obaku,
The job of the Fed is to maintain the balance between the two economic evils: inflation and recession.
Regardless of what I think of Inflation, the stark reality of our economic system is that things happen in the blink of an eye and the reaction time is getting shorter by the day.
Wall Street sharks make profits in any market situation, so let us not put too much weight on how they react to Fed's rate adjustment!
The real sucker in this system is the middle-income wage earner. Over the past 30 years, the real income of this person has gone down the tube, and disposable income keeps on shrinking!
searchbeam: There are profits to be made. They have to wait for enough of a drop off to make a killing. You don't think this is by accident do you? The banks start getting to many forclosures. They start offering them at discounts. How do think the wealthy clean up on our misery. They will play this out until there is no more profit to be made. What a shame for the working man and woman who lose while the wealthy just lick their chops.
Speaking of Fed Chairman Ben Bernanke,where is he? Why on earth has Netscape placed a photo of retired Chairman Alan Greenspan with this story? Someone asleep at the wheel? Mr. Bush, wake-up, and get out from behind the wheel.
So, it took Jon Stewart to get Alan Greenspan to admit publicly that there is no free market, if the supply of money is centrally controlled, and that he (Greenspan) doesn't know one thing more about economic forecasting than he did 50 years ago, and neither does anyone else.
And he almost, but not quite, got an admission that Fed policy rewards investors, and punishes saving, and wage earners. Not that the savings part is in much dispute, since the 'invisible hand' has sent the U.S. savings rate to 0.0%.
In two minutes, Jon got more truth out of Greenspan than the entire 'mainstream media' has in the past 20 years.
Obaku: Why save in an account that pays less than inflation and is taxed. That is counter productive. How can the bankers and thieves that set the rates. Justify their gouging interst rates for loans while paying little for the use of the savers money. Honest profit is one thing,shyster profiteering is another.
One unsolved economic problem of the day is how to get rid of the Federal Reserve. The way out of this mess is for We the People to reinstate the Constitution as the Supreme Law of the Land. Until and unless we act to do so, this fraudulent money, banking and taxing system will continue to enslave us.
I believe this move to stave off a recession will do just that: delay the inevitable recession. But first, we'll have to deal with the coming inflation problems. Bush will be out of office then and the blame for the coming economic turmoil will, unfortunately, fall on his successor. Just the opinion of one doom and gloom pessimist.
skeek: Agree with you 100%. Nothing like a false boost to the economy to ensure votes. I think they miscalculated the drop off point. I'm sure on their charts they had it well into 2009 before the bottom fell out. That way they point the finger at the new guy. I'm so glad it didn't work out that way for them. I'm sorry for the ones who will lose their homes. They should have had someone to talk to besides the greedy real estate brokers and loan "specialists" who preyed upon their wanting the american dream at any cost. What this will cost in the end is unimagineable. If rates went up the economy would stall. Steep price to pay. At least thats what I think. A depression? Maybe.
We are beginning to see the end of this type of fiscal policy. It is, and has been a foolish way to manipulate wealth. It soon will hurt or worst case scenario kill the dollar. Be prepared. It'll come when you least expect it. In for a rough ride now as they can't control this . Gone to far down the slope. Of course, they'll prop it up for those who need to re-direct their monies. The common man will be the one who is hurt.
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Wall street makes more money and our gov. (thats us) gets more debt. Boy its a good thing bush has an MBA lol. And by the way, i do not expect republicans to understand the long range ramifications or this move.
You disparage all the rest of us who hold MBA's by linking us to the intelligent infant currently in the white house.