Will This Rate Cut Actually Work?
Or is this just a bandaid on a shotgun wound?
Answers
104 points
money19 answered one year ago …
The market "already spoke" in that it was trading in the credit markets as if the rate cut was priced in and more. These are unprecedented times where instead of the market "hanging on for the fed announcement" actually drove rates in a direction taht they believe represented risk/return trade-off. The LIBOR rate is a very good example of this.
Back to your question - the Federal Gov. has not only reduced rates but over the last month used several methods to inject capital into our economy - approved 700 billion(with methods be planned), ~250 billion for about 10 key banks(some incluide C, BAC, JPM, GS, WFC, BK), buyng commerical paper - all of which overtime will have a positive impact towards unfreezing our credit markets.
Very importnat to this all is the recognition that today more than ever economies of the world are linked and our "problems" become other econimies problems in a variety of ways. Global participation in coordinating rate decreases or increases is very important.
3963 points
MNSL answered one year ago …
Global efforts on the interest rates will bring liquidity to the market gradually.
In the short run inflation will increase in some countries together with falling currencies.
Overall this will affect positively in the long run. There will be some stability in the money market.
Change of interest rate, currency trend and commodity trend will benefit, come companies, some sectors and some countries most. Some counties will have positive balance of payments in the next financial year.
356 points
Dusty answered one year ago …
No. Humpty Dumpty has fallen off the wall and splattered all over in a great big mess. Those guys from inside the Beltway and from Wall Street are just confusing the issue and getting in the way of a clean-up. They have no choice of course. All the American voters know who really caused the problem. The perpetrators are trying to make it look like they are doing something about it, are doing something useful and appropriate, are very busy saving themselves from a wrathful public. When this Election has wound down, in a few days or a few weeks, reality and the painful inevitable corrective events will proceed. More smoke and mirrors will be invoked and repair and resurrection of the economy will be a thing of fits and starts. Pick up two sandwiches at the Deli and fill up a big thermos of coffee. Us ordinary mortals are going to be watching it all happen for a very long time.
Read more from Dusty
2222 points
readytoretire answered one year ago …
Rate cuts are not an instant fix. The market took a while after the rate hikes to slow down. It will take a while for the rate cuts to change things. The big banks are still improving their balance sheets (with all the bad/unknown paper still on their books) and until they feel comfortable lending, ain't nobody happy. And by that time, more people will have lost their job, leading to more drop in home values, raising the banks fear of lending for homes. The rate cut will help homeowners whose mortgages are tied to the rate, but the reset period can be from 1-5 years, so no instant help.
Read more from readytoretire411 points
jester112358 answered one year ago …
Just examine how well the last rate cute to 1% in 2003 "worked". That's why we're in the present dilemma. You can't solve a debt problem with more debt! Creating huge amounts of money out of thin air by fiat never works. Savings and production does.
Read more from jester112358
