one of the boldest experiments

[Tempest]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aBYiNV2dvxxA&refer=home

 Quote:

Dec. 16 (Bloomberg) -- The Federal Reserve may today reduce its main interest rate to the lowest level on record and prepare for one of the boldest experiments in its 94-year history: using its balance sheet as the key tool for monetary policy. The Fed’s Open Market Committee will probably cut the benchmark rate in half, to 0.5 percent, according to the median of 84 forecasts in a Bloomberg News survey. The central bank may also signal plans to channel credit to businesses and consumers by further enlarging its $2.26 trillion of assets.

 Quote:

It’s unclear how specific the Fed will be in today’s statement in outlining options after exhausting rate cuts. Bernanke has repeatedly invoked emergency powers not used to since the 1930s and expanded the Fed’s credit to the economy by $1.4 trillion.

 Quote:

Tumbling property values and stock prices have hammered consumers’ finances. The net worth of U.S. households fell by $2.81 trillion to $56.5 trillion in the third quarter, the biggest decline since records began in 1952, according to the Fed’s Flow of Funds report.

Do they really know what they are doing? Seems like they are rolling the dice.

 

[Quattro Pete]

It looks like they actually cut it to betw. 0 and 0.25%. http://money.cnn.com/2008/12/16/news/economy/fed_decision/index.htm?cnn=yes

 

[Johnny]

Does that mean I can refinance @ 2%.

 

[Tempest]

Maybe, if you can find a bank that will lend.

 

[greenaccord02]

Yeah, if your credit is over 1000 and you have no debt and you make 1 million a year after taxes.

 

[Johnny]

If I made a million before taxes I would need no ones help.

 

[buster]

http://gregmankiw.blogspot.com/

 Quote:

Some would view this as a radical change in monetary policy. In some ways it would be. Given how weak the economy is, however, a bit of radicalism may be called for. I am more comfortable having the Fed commit itself to modest inflation than having the federal government commit itself to a trillion dollars of new spending. The abandonment of "price stability" would be the modern equivalent of Roosevelt's abandoning the gold standard. Of all the things that Roosevelt did to get the economy out of the Depression, jettisoning the gold standard was the most successful. Today, monetary policy is not fettered by gold but by fear of inflation. Perhaps it is time is get over that fear, at least for a while. As Jim Tobin said in an earlier era, there are worst things than inflation, and we have them.

 

[VeeDubb]

Fed rate drops are only weakly correlated with long term rates which are what mortgages are based on. But the Fed is also actively engaged in the mortgage market which is why 30 year fixed rates have dropped to 5%. I just refinanced at 5% which lowered my monthly payment by about $180. So I guess I got my bailout money.

 

[oilyriser]

You can't push a rope.