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Old 07-13-2008, 05:14 AM
 
Location: Central CT, sometimes NH.
3,256 posts, read 4,913,760 times
Reputation: 3029

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Attention Federal Reserve: It's time to start moving the Fed Funds Rate up to 5%. That should translate into an 8% Prime rate.

Here's the rationale:

Real companies with real products and real earnings do not need cheap money they can borrow in order to stay in business. Companies like General Electric, United Technologies, Exxon, Kellogg, Walmart, McDonalds, etc. have traditionally done just fine with higher costs of capital.

Savers, like myself, are sick of our substantially less than the real rate of inflation returns that we have been stuck with as money has been passed out like candy by the banks to sketchy businesses, borrowers, and profiteers.

I think worthy financial institutions will agree that this scam has not added longterm value to their organizations as witnessed by the 70% decline in the value of financials and the "sitting-on-the-edge-of-ruin" financial condition of some of our largest and oldest financial institutions like Citibank, Bank of America, Bear Stearns (RIP), etc.

Other important reasons for higher rates:


The higher rates will attract greater foreign investment in our country's banks.

The higher rates will increase the value of our dollar against other currencies.

The higher rates will slow down the level of imports reducing the trade deficit

The higher rates will significantly reduce the speculative price inceases in crude reducing the cost to consumers.

The higher rates will fend off inflationary pressures.

The higher rates translated to higher yields on savings instruments and bonds will encourage greater saving rates by consumers.

The higher rates and resulting yields will improve the supplemental income of retired Americans.

Mr. Bernanke are you listening or are you too busy playing with your academic models and other toys you are unwilling to share?
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Old 07-13-2008, 10:34 AM
 
Location: Heartland Florida
9,324 posts, read 23,251,727 times
Reputation: 4895
If I had my way it would be the same as the income tax rate. It seems as the foreign investors are still dumb enough to invest in the dollar at low rates, so why should they raise rates?
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Old 07-13-2008, 10:55 AM
 
Location: San Diego California
6,797 posts, read 6,124,851 times
Reputation: 5171
The higher rates will attract greater foreign investment in our country's banks.[I][/i]

What you fail to illuminate, is that higher interest rates tighten spreads and lower Bank profits. What is the Fed? It is a group of private Banks. Why would the Fed do anything to hurt their own profits? Higher interest rates promote savings, and discourage spending; now how can big business get your last penny if you are not out there spending like a drunken sailor? I believe interest rates will be raised, but it will not be to help the American citizens. The only reason the Fed will raise rates is because inflation will interfere in the Governments ability to borrow the money they need to keep afloat from the Arabs and the Chinese. Rates will rise, after the Fed has created as much debt as it possibly can, and bankrupted as many citizens as possible. We are now seeing for ourselves why Thomas Jefferson warned us that a Central Bank would be our downfall.
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Old 07-13-2008, 12:10 PM
 
Location: Ohio
18,053 posts, read 13,266,597 times
Reputation: 13871
Quote:
Originally Posted by Lincolnian View Post
The higher rates will increase the value of our dollar against other currencies.
No, it will not.

The value of the US$ is based on its demand as an International Trade Currency for the trading of all commodities such as oil, natural gas, coal, timber, minerals, gold, silver, other precious metals, metal ores, wheat, barely, sorghum, corn, rice, soy beans, cotton, wool and other grains and fabric bases.

The US$ was inextricably linked to the high volume sale of oil and natural gas in US$ on the world market.

The result is that the US$ has been over-inflated in value against other currencies for the last several decades.

Now that there's a viable alternative to the US$ in the Euro, along with the Ruble and Yuan, the US$ is no longer in such high demand.

As more and more countries switch over to Euros, Rubles and basket currencies to sell their oil, natural gas and other commodities, the US$ will continue to steadily decline, and there's nothing the Federal Reserve can do about it.

There's nothing the US can do about it either, unless you want to start the draft and have a military even larger than the Reagan military so you can invade countries and force them to sell commodities in US$ (like Iraq).
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Old 07-13-2008, 01:38 PM
 
655 posts, read 699,023 times
Reputation: 240
I don't know about 5% right away, but I can almost assure you they will be rasing the prime rate a 1/2 point at the next meeting.
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Old 07-13-2008, 02:21 PM
 
Location: Backwoods of Maine
6,940 posts, read 7,673,754 times
Reputation: 17847
Quote:
Originally Posted by jimhcom View Post
What you fail to illuminate, is that higher interest rates tighten spreads and lower Bank profits. What is the Fed? It is a group of private Banks. Why would the Fed do anything to hurt their own profits?
Right you are! The Fed will do what benefits the banks, not the US citizens. We are just sheep to be fleeced.

Right now they are in deep doo-doo trying to prevent more bank failures. The fall of IndyMac this weekend, following Bear Stearns just 4 months ago (with many more to come, I'm afraid), is indicative of the predicament the Fed is in. It has to keep the borrowing rate at the bankers' begging-window low, or banks will not be able to afford to trade in their toxic trash for US bonds.

Raising rates at this time would put the country into a severe downturn. We are just about in one, anyway, IMHO. The Fed simply cannot undo two plus decades of loose monetary policy (started by Greenspan) in a few months. They will talk tough but will fail to act. They will destroy the dollar before they will let any sitting administration take the heat for the poor economy. That's political suicide.

If Obama becomes president, which it looks like, he will end up being very unpopular and will not get a second term. Not due to any fault of his - he would be walking into economic quicksand and hasn't the experience to keep us from sinking. Neither does McCain. I can't remember the last presidential election when I wanted to vote for "None of the above".
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Old 07-13-2008, 04:42 PM
 
Location: Jonquil City (aka Smyrna) Georgia- by Atlanta
16,248 posts, read 20,613,022 times
Reputation: 3587
Quote:
Originally Posted by Lincolnian View Post
Attention Federal Reserve: It's time to start moving the Fed Funds Rate up to 5%. That should translate into an 8% Prime rate.

Here's the rationale:

Real companies with real products and real earnings do not need cheap money they can borrow in order to stay in business. Companies like General Electric, United Technologies, Exxon, Kellogg, Walmart, McDonalds, etc. have traditionally done just fine with higher costs of capital.

Savers, like myself, are sick of our substantially less than the real rate of inflation returns that we have been stuck with as money has been passed out like candy by the banks to sketchy businesses, borrowers, and profiteers.

I think worthy financial institutions will agree that this scam has not added longterm value to their organizations as witnessed by the 70% decline in the value of financials and the "sitting-on-the-edge-of-ruin" financial condition of some of our largest and oldest financial institutions like Citibank, Bank of America, Bear Stearns (RIP), etc.

Other important reasons for higher rates:


The higher rates will attract greater foreign investment in our country's banks.

The higher rates will increase the value of our dollar against other currencies.

The higher rates will slow down the level of imports reducing the trade deficit

The higher rates will significantly reduce the speculative price inceases in crude reducing the cost to consumers.

The higher rates will fend off inflationary pressures.

The higher rates translated to higher yields on savings instruments and bonds will encourage greater saving rates by consumers.

The higher rates and resulting yields will improve the supplemental income of retired Americans.

Mr. Bernanke are you listening or are you too busy playing with your academic models and other toys you are unwilling to share?
Bernanke might not agree with you but I do.
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Old 07-13-2008, 04:46 PM
 
Location: Jonquil City (aka Smyrna) Georgia- by Atlanta
16,248 posts, read 20,613,022 times
Reputation: 3587
Quote:
Originally Posted by Mircea View Post
No, it will not.

The value of the US$ is based on its demand as an International Trade Currency for the trading of all commodities such as oil, natural gas, coal, timber, minerals, gold, silver, other precious metals, metal ores, wheat, barely, sorghum, corn, rice, soy beans, cotton, wool and other grains and fabric bases.

The US$ was inextricably linked to the high volume sale of oil and natural gas in US$ on the world market.

The result is that the US$ has been over-inflated in value against other currencies for the last several decades.

Now that there's a viable alternative to the US$ in the Euro, along with the Ruble and Yuan, the US$ is no longer in such high demand.

As more and more countries switch over to Euros, Rubles and basket currencies to sell their oil, natural gas and other commodities, the US$ will continue to steadily decline, and there's nothing the Federal Reserve can do about it.

There's nothing the US can do about it either, unless you want to start the draft and have a military even larger than the Reagan military so you can invade countries and force them to sell commodities in US$ (like Iraq).
I don't agree with that. Cheap dollars equals inflation and sooner or later- mark my words- inflation is going to show up at the doorstep. In fact it really already is here except for the fact that food and fuel are not counted towards inflation and housing is which makes "offcial" or core inflation much lower than what it would be. And there is no cancer worse than inflation for eating up the value of a dollar.
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Old 07-13-2008, 10:04 PM
 
Location: Heartland Florida
9,324 posts, read 23,251,727 times
Reputation: 4895
If they include housing in the inflation calculations, why was it not counted when it was going up 20-50% a year?
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Old 07-13-2008, 10:08 PM
 
Location: Great State of Texas
86,093 posts, read 69,949,006 times
Reputation: 27520
Quote:
Originally Posted by tallrick View Post
If they include housing in the inflation calculations, why was it not counted when it was going up 20-50% a year?
They changed it to a rental type of figure..in other words it got re-defined.
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