What on Earth is the Federal Reserve doing?

I know I asked a similar question on this yesterday. Folks...injecting more money into the system will help with liquidity problems in the short term---in the long term, it's only going to add fuel to the inflation problem! They did this 2 times last year (and it didn't work!) Additionally, they are still thinking about reducing the prime rate! The last time they did this mortgate rates did not fall with the rate cut! Are they hoping that such money will fuel more investment funds in the financial sector (even though many investors are still wary about the overall economy????) Are they hoping to get more mortgages closed---even though the mortgage rates have not fallen yet? What on EARTH are they doing in Washington DC folks? They did us all NO FAVORS today by pumping more money into the system!!!!! there is a solvency problem too...but there is a liquidity problem as well (some firms cannot pay margin calls!!!) well..pay...fulfill--whatever---they cannot simply meet margin calls.... http://www.marketwatch.com/news/story/fed-turns-spigot-money-again/story.aspx?guid=%7B9AF5E673%2D0BA7%2D40E6%2D9D35%2D8B639C7860E2%7D&siteid=yhoof

they are cutting interest rates like there is no tomorrow. which raises the price of gas but unfortunately, they have no choice.

Printing more money does nothing, or causes problems. It's never fixed anything. When Russia's economy collapsed, over-printing of money was part of the reason. Actually, I take that back. It does have a use, Russia printed so much money that when it became worthless they used it to fuel the fires to keep them warm. The mortgage bubble is huge, not much is going to affect it. Lowering the prime rate might keep it in check, but that's the best that can be done.

We need a plan a common sense approach to our economic problems. Vote Democratic 2008!

They're destroying the dollar and turning our country into a third world economy. What they should do is nothing. Let it work it's way through the system. It seems like Paul Volker is back at the Fed.

Maybe along with that, they can just keep printing more money to devalue the dollar more and more.

I agree, they are doing us no favors. The longer we wait to pay the piper for this insane spending, the higher the price.

I'm not sure. It's not all straight forward. By printing money and lowering the interest rate, they devalue the dollar. Doing this sounds bad, but it has the affect of making American made goods more affordable world wide and increasing trade. On the flip side, as you point out, it makes things like oil more expensive and creates a problem with inflation. I'm also a tad ticked that the mortgage companies haven't stepped up to the plate and dropped their rates, but I can't say I blame them. While they are, in large part, responsible for this whole mess, they're circling the wagons. They don't want to get tied into a 30 year interest rate that is not profitable for them and they aren't approving loans because they don't want to incur any more bad debt. They've got to loosen up or this thing will never end.

I'm hoping mortgage rates fall again. I have almost perfect credit (over 800) and I want to refinance again with a lower rate.

I think they are expecting people to use the money to pay down debt, which will bail out many in the financial sector, such as mortgage companies and credit lenders. JMO.

in case you have been left out of the loop, here is what the FED has been doing for the last few decades: 1- tie the US currency into as many economic markets as possible 2- inflate the dollar by huge amounts which allows foreign markets to increase their buying power in US goods 3- tie foreign economies into the economy of the US through trade and debt this serves 2 ends. first, people and corporations with large amounts of capital to begin with arent largely affected by the inflated dollar and are able to take advantage of the imbalance in the global economy to hike their prices and rack up huge profits (example one - oil industry, among many others). second, it moves the world toward a credit system instead of a real assets system which basically enslaves (makes indebted) all who enter it, then increasing the base of operations to start the cycle all over again by inflating the currency. its all part of the economic war the US has been waging with China for decades. stay tuned, much more to come in the future...

It's a couple of things. Lowering short term rates steepens the yield curve. What this means is that the banks can borrow at very low short term rates and then lend at higher rates for long term. THis is a HUGE bail out at taxpayer expense, because it is highly inflationary, as you said. Long term rates, such as mortgages, are only going to go higher as more and more inflation kicks in. To characterize the current crisis as a liquidity issue is a misnomer. For the banks, it's a SOLVENCY issue. Most of the major banks in this country (example Citi) are insolvent. The Fed's rate cuts are designed to allow the financial system to recapitilize and hopefully not be forced to liquidate their holdings. They are also trying to keep the market up. A crashing market creates a spiral of derivatives and margin call liquidating which makes the problem a lot worse. The White House has what they refer to as the PPT or Plunge Protection Team, consisting of Bernanke, Paulson and others whose job is to prevent that crash. Don't forget, they are also punishing savers by lowering the yields they can expect on their savings and money markets. But they do also help to offset some of the credit default issues consumers are having by lowering the adjustable rates that consumers have to pay on their outstanding debt. The FED doesn't really have any good options at this point, but their intention is to protect the banks and the financial system, not the individual citizen. The trade imbalance argument is also a false flag now, because the American economy doesn't have enough manufacturing capacity anymore to take advantage of this, and global wage arbitrage still makes it cheaper to produce overseas then in America.

I was in Asia during the Asian currency meltdown. The major problem was the free flowing money from developed countries trying to cash in on the next "big thing" in developing countries. The problem was that the free liquidity resulted in the people and the government going crazy with inefficient spending. As I was watching people's wealth being destroyed, I thanked God that I lived in America with the strong dollar with the Federal government smart enough to avoid such calamities. Enter 2007 ~ 2008. The credit problems and the mortgage mess was exacebated by cheap interest rates and "free liquidity" flowing through the system. It has finally caught up with the American public. Now the Fed and Bush administration's answer is to free up more cheap money so that people can spend more? I understand that Bush doesn't want to be remembered as the man who reigned during TWO recessions and ruin his SPOTLESS reputation as a great manager, but does he really think that this is smart policy? Federal Reserve is supposed to be independent, but it's moving lcok step with the current administration. The lowering of interest rates is destroying the dollar and inflating consumer goods prices. The responsible public with the money in the bank is facing much smaller returns... and has this helped the economy? Has this helped the exporters to a major degree? The current policy makers should be ashamed.

the Rothschilds et al have collapsed the global derivatives markets last year but since they control the mass media they're not telling anyone. you're completely correct this is recipe for meltdown and that's exactly what's on the cards . in meanwhile they're busy asset stripping the world's reserves like oil, gold, silver even water through control of companies like violia water so they can be in a position of control the collapse becomes obvious. will we blame the right people?

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