Rate Cuts and the Costs of a Weak Dollar

[Faustus]

"The Fed's Bender"

[Gaius Octavius]

So, what do you think?

[Faustus]

So, what do you think?

I think interest rates are too low.

[Gaius Octavius]

And he selfishly says: I'd like to get my hands on some 14%, 30 year Treasuries. Missed them back on Volkers watch.

[Faustus]

And he selfishly says: I'd like to get my hands on some 14%, 30 year Treasuries. Missed them back on Volkers watch.

 

Of course, and the rest of the world would find them attractive also, which should not be forgotten. Some interest rates (for construction and the like) in the very late 70's and very early 80's were at 18 percent at the commercial banks. We survived that: side contracts and trades/swaps became very popular.

[Gaius Octavius]

Some lucky people could pay a mere 25% for a mortgage.

 

At year end, back in the 80's, the banks would arrange for a 25% last trade for Fed Funds and nail me for that rate on my collateral loan which was at the Prime Rate the rest of the year.

[Faustus]

Some lucky people could pay a mere 25% for a mortgage.

 

At year end, back in the 80's, the banks would arrange for a 25% last trade for Fed Funds and nail me for that rate on my collateral loan which was at the Prime Rate the rest of the year.

(Horror stories!)

I got stuck on a 1979 five year contract at 8% on a spec house with a commercial loan at 18%, which I credited (no pun intended) Volker for help. But we all just had to work harder, and were helped some by inflation.

[Moonlapse]

But should interest rates be left to a central economic planner to determine in the first place?

[Gaius Octavius]

"In the 21st century, most credit is created in what Pimco's Bill Gross has called the Shadow Banking System, consisting of securities dealers, hedge funds and all manner of exotica such as SIVs, structured investment vehicles, which reside off banks' balance sheets. Instead of bank deposits, the Shadow Banking System is funded by the money markets, notably the repurchase-agreement or repo market."

From: http://online.barrons.com/article/SB120939...html?mod=djemBF

The above site so that we're all working on the same page.

 

Bill left out corporate stock and credit cards.

 

There is about 45 trillion of corporate debt outstanding. About 9 trillion plus of marketable US debt. I don't know how or where the non-marketable debt in the trust funds is counted. Then there is the debt of the Government Sponsored Enterprises. And then there are state and municipal bonds. I wonder if God knows how much of these things are outstanding. All rates will depend on how much of this stuff is trading at one time. So long as the markets for these securities remain in reasonable balance, the Fed can exercise influence over their rates, particularly on the short end.

 

I don't believe that the Fed is a central economic planner.

[Moonlapse]

So what is the Fed? And what role are they currently playing?

[Gaius Octavius]

I believe that the Fed's role is to oversee monetary policy, and not to plan the economy. I don't think that anyone 'plans' the U.S. economy in the sense of the USSR's Five Year plans.

 

The Fed, amongst other things, has supervisory authority over national banks; regulates margin requirements; sets deposit and checking reserve requirements, and of course may create fiat money.

Edited April 30, 2008 by Gaius Octavius

[Moonlapse]

I know their powers are not even close to completely centralized, but what role are they currently playing as it relates to the economy? If anyone has anything close to central economic controls, it's the Fed, and they are using their monetary policy powers (and expanded powers recently) to attempt to create uninterrupted economic prosperity.

[Gaius Octavius]

If that is the way you think, don't forget fiscal policy. The tax code is a perfect example of treating the better people better. It doesn't amaze me to any end the number of items stuck in the convoluted tax code that benefit only one non-taxpayer.

 

Forbes reports that the average grand theft of todays CEO's is 433 times the earnings of the inflation producing peon. It used to be 40 times in the 1980's. In the late 60's it was about 10 times (This is from my memory.). I wonder what the modal statistics are. As a conspiracy theorist, .... I'll leave it there - for now.

 

As to what role the Fed is playing, I think that St. Bennie is keeping it under his beard. Bailing out criminals would be a good guess while throwing America a CENSORED .

Edited May 1, 2008 by Gaius Octavius

[Moonlapse]

Eh... I'll just drink my beer now and enjoy a short bout of ignorance.

[Gaius Octavius]

What are you drinking? Don't be selfish.