Keeping Rates Too Low 'Dangerous Gamble' (loans, collection, free market, debt)

[highcotton]

Fed's Kansas City Reserve Bank President Thomas Hoenig: Keeping Rates Too Low 'Dangerous Gamble' (http://www.cnbc.com/id/38693128 - broken link)

This week, Hoenig dissented for a fifth straight meeting from the vow to keep rates low, and said he believed the economy did not need further help. "We need to get off of the emergency rate of zero, move rates up slowly and deliberately," he said.

[Philip T]

So when can we "outsource" the bankers?

I am thinking we need to outsource their @sses in a real big way.

[texdav]

Thyey already in many instacnes are outsourced. They deal in international finance around the world and many are actaully not from the USA.

[user_id]

Hoenig seems to be living on another planet, he sites growth rates being decent while ignoring the cause of the growth rates. Perhaps he was unaware of the ~$700 billion in government stimulus?

Ship this guy to mars where he belongs.

[Teak]

Naw, I agree with him. The Fed Funds Target Rate needs to start going up. There are many good reasons. I will list just a few:

1. Greenspan kept the FFTR @ 1-2% for too long back in 2002-2004 and that led to massive speculation since money was so cheap to borrow. This helped to precipitate the housing boom/mania.
2. Low interest rates hurt savers. The U$A has a significant problem with debt at all levels: personal, company, city, state, and federal. Okay, some companies are doing alright, holding lots of cash but not hiring. Low interest rates encourage borrowing, not saving.
3. Retirees, especially, are hurt by low interest rates. CDs, bank deposits, etc. all pay little return on saved money.
4. The bankers that made shaky loans on mortgages are the ones benefitting from a low FFTR. They borrow at, what?, 0.25% or so, and lend out at 4.5%.
5. The gov't wants to keep rates low to encourage the recovery of the housing market. Well, it ain't recovering.
6. The US$ has sunk quite a bit against Asian currencies. Has that helped our trade deficit? Not with China it hasn't. Americans continue to buy junk made in Asia; it's not helping American families or the overall economy.
7. Higher interest rates will encourage greater purchases of US treasuries by foreigners. It will also give them a greater incentive to save their money in US$.
8. It is time for America to become a nation of SAVERS, as opposed to BORROWERS. What is good for the family, is good for the nation (a collection of families).

So many reasons. Time for higher interest rates. Better to take the strong medicine and get it over with. These low rates certainly haven't brought US jobs back to our shores.

It's not like the KC Bank Prez is calling for a jump from 0.25% to 15%. How about 0.25% increments upwards every now and then?

[hskrfan2187]

Originally Posted by Teak

Naw, I agree with him. The Fed Funds Target Rate needs to start going up. There are many good reasons. I will list just a few:

1. Greenspan kept the FFTR @ 1-2% for too long back in 2002-2004 and that led to massive speculation since money was so cheap to borrow. This helped to precipitate the housing boom/mania.
2. Low interest rates hurt savers. The U$A has a significant problem with debt at all levels: personal, company, city, state, and federal. Okay, some companies are doing alright, holding lots of cash but not hiring. Low interest rates encourage borrowing, not saving.
3. Retirees, especially, are hurt by low interest rates. CDs, bank deposits, etc. all pay little return on saved money.
4. The bankers that made shaky loans on mortgages are the ones benefitting from a low FFTR. They borrow at, what?, 0.25% or so, and lend out at 4.5%.
5. The gov't wants to keep rates low to encourage the recovery of the housing market. Well, it ain't recovering.
6. The US$ has sunk quite a bit against Asian currencies. Has that helped our trade deficit? Not with China it hasn't. Americans continue to buy junk made in Asia; it's not helping American families or the overall economy.
7. Higher interest rates will encourage greater purchases of US treasuries by foreigners. It will also give them a greater incentive to save their money in US$.
8. It is time for America to become a nation of SAVERS, as opposed to BORROWERS. What is good for the family, is good for the nation (a collection of families).

So many reasons. Time for higher interest rates. Better to take the strong medicine and get it over with. These low rates certainly haven't brought US jobs back to our shores.

It's not like the KC Bank Prez is calling for a jump from 0.25% to 15%. How about 0.25% increments upwards every now and then?

Couldn't agree with you more. I don't think there is a recovery in place (as user id pointed out) but that there is quite a bit to correct still. The whole basis for this recession was consumer debt, since debt levels peaked at their highest in 2009 the US consumer has only paid their debt down by about 3%. We need the higher rates, and we need them bad so that people can start paying down this debt...and yes there will be pain along the way. More of these service sector businesses will fail (as people will save more than they are and spend less) and unemployment will go up but the economy will balance out. We need to transition from consumers to savers, and to producers. The lack of spending alone would help the trade deficit, as we wouldn't need to import as much if people are saving more.

There's a reason that the economy is going down now that the stimulus package has ran its course. It's just picking up where it left off before the government intervened with the free market forces. The correction will happen one way or the other, it just depends on how long the government wants to drag this thing out with stimulus packages and manipulation of interest rates.