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Stocks jumped after the Fed hinted at further interest rate cuts. [AP]
I concur. A bad decision after raising minimum wages.
I will never understand the stock market. To me its a bunch of dudes who talk all day about how expensive my bag of frozen corn from the supermarket will be.
If something good happens because someone hints at a Fed cut, then why don’t they drop hints all the damn time to keep the good times rolling?
I know its more complicated then that, but is it really? My head hurts. Rant over.
Yea! Soon $’s will be equal to the Peso! We’ll be able to take all those mfg jobs back from Mexico!
/Don’t forget, the Canadian $ is already worth more than the US $.
Dropping interest rates could increase inflation but that would only happen if business was being throttled by higher interest rates (which they are not).
Lower interest rates are not going to fix the problems with existing credit paper that has already been sliced and diced into many small parts and then recombined. All they can hope for is that lower FED rates translate into lower real market rates from the banks, thus keeping some of the ARM borrowers out of foreclosure and bringing more losses to this credit paper that too many banks are holding.
However, lower rates will reduce the interest rate on savings instruments (which we don’t need since the USA has one of the lowest savings rates in the world). This will impact people in retirement who tend to depend on short-term savings.
Lower rates will also cause the dollar to tank further, unless the rest of the world starts lowering their interest rates. This will make foreign goods more expensive. This will be bad if you are considering buying a new foreign car. But if you have used foreign car, the value should hold up better.
There are all kinds of similar pluses and minuses to changing the interest rate target at the FED level. I don’t believe it will solve any of our problems though. Japan has had near zero interest rates since 1990 or so and it hasn’t helped them grow their economy very much.
I know the fed suggested that they’ll lower rates, but I hope they were bluffing. This WILL tank the dollar as well as my high-interest online savings accounts. Maybe it’s just as well that I’ve been investing increasingly in non-USD stock markets lately.
Great, interest rate cuts in a futile effort to prop up a ailing economy.
We need some economic Darwinism. If people have iffy investments in bad paper, we don’t need to save them from themselves.
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