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"On Tuesday, Chairman Ben Bernanke opens a two-day meeting where he will help craft a Fed plan to buy more government bonds. The idea is for those purchases to further drive down interest rates on mortgages and other loans. Cheaper loans might then lead people to spend more. The economy would benefit. And companies would step up hiring.
"That's the plan, anyway. But many question whether the Fed's new plan will provide much benefit. For one thing, the Fed already has driven rates to super-low levels. And anticipation of the Fed's new program has helped push down mortgage rates to their lowest points in decades. Yet the economy is still struggling."
Fed Poised To Buy More Bonds To Try To Aid Economy : NPR (http://www.npr.org/templates/story/story.php?storyId=130995906 - broken link)
The Fed is pathetic. No one will buy our crappy low-interest bonds, so the Fed is once again trying to shuffle the debt around to make it look like something is being stimulated. I expect it to get the same result as last time: Absolutely nothing.
Our new bond issues are now paying a negative rate the past two sessions. That says a lot - no one wants our debt!!!
The Fed needs to bump the rate up 25-50 basis points, which will spur businesses sitting on loads of cash to start spending...which in-turn will create employment and spur the economy. The Fed has done nothing in the past year or so but use their tools in a fake way to offset the mortgage problem. They should have let the markets handle it - it's very effective...
The Fed is pathetic? That's like blaming the repairman for the broken dishwasher.
Except that the Fed did break the dishwasher. It was broken when it was installed. It was their policy that said the early 2000, "Hey guys, let's drop interest rates to 1%. Nothing bad like a housing bubble will come from that. Hurr durr." It was also Ben Bernanke in 2002 that said the Fed was like a printing press and that we could simply print more money as it was needed. Obviously these guys are totally clueless or know the damage that they are doing and just choose not to care. You can't simply double the monetary base and play around with interest rates and expect that nothing bad will happen.
Except that the Fed did break the dishwasher. It was broken when it was installed. It was their policy that said the early 2000, "Hey guys, let's drop interest rates to 1%. Nothing bad like a housing bubble will come from that. Hurr durr." It was also Ben Bernanke in 2002 that said the Fed was like a printing press and that we could simply print more money as it was needed. Obviously these guys are totally clueless or know the damage that they are doing and just choose not to care. You can't simply double the monetary base and play around with interest rates and expect that nothing bad will happen.
Except that the Fed did break the dishwasher. It was broken when it was installed. It was their policy that said the early 2000, "Hey guys, let's drop interest rates to 1%. Nothing bad like a housing bubble will come from that. Hurr durr." It was also Ben Bernanke in 2002 that said the Fed was like a printing press and that we could simply print more money as it was needed. Obviously these guys are totally clueless or know the damage that they are doing and just choose not to care. You can't simply double the monetary base and play around with interest rates and expect that nothing bad will happen.
He was talking about heading off deflation. "Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.... Lower rates over the maturity spectrum of public and private securities should strengthen aggregate demand in the usual ways and thus help to end deflation."
/More than a year after the recession ended, the economy has failed to generate a robust rebound. The economy did grow slightly faster last summer as Americans spent a bit more, the government said Friday. But it wasn't nearly enough to lower unemployment. The jobless rate stands at 9.6 percent. It's been at least 9.5 percent for 14 months, the longest stretch since the Great Depression.
The "slack" in the economy - factories running below capacity and companies limiting hiring - has kept inflation historically low. In the 12 months that ended in September, consumer prices rose just 1.1 percent.
Bernanke has said the Fed would like to see inflation closer to 2 percent to show the economy is making a solid recovery. The Fed will likely signal in its policy statement after the meeting that it favors slightly higher inflation. But analysts think it will probably stop short of mandating an explicit inflation target of 2 percent or higher.
Bernanke doesn't want to see super-low inflation turn into deflation. That's a widespread drop in prices, wages and the values of homes and stocks. Deflation can cause people to delay purchases because they feel they can buy later at lower prices. Falling incomes also make it harder to pay debts. Foreclosures rise. So do bankruptcies. Once it takes hold, deflation is hard for policymakers to break. Deflation contributed to Japan's "lost decade" of the 1990s, and the country is still battling it./
Our new bond issues are now paying a negative rate the past two sessions. That says a lot - no one wants our debt!!!
Actually it says just the opposite but is a bigger sign of investors opinion of the future..
Think about it.. If the government can get negative rates on their bond offerings, it means that investors are willing to buy the debt and lose money. You need to think about why this is true though because no one wants to lose money on their investments..
The reason this is true is because investors have no where else to turn. Government has made "investing" such a negative, that they are willing to lose money to not take the risk to earn more. This of course results in no new jobs, increased welfare etc. Its such a negative sign of investors opinion of our future that its not even funny..
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He was talking about heading off deflation. "Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.... Lower rates over the maturity spectrum of public and private securities should strengthen aggregate demand in the usual ways and thus help to end deflation."
