Fed Ready To Cut Interest Rates Anew

Stocks Rise After Bernanke Vows More Cuts To Ward Off Possible Recession

(CBS/AP)  Federal Reserve Chairman Ben Bernanke pledged Thursday to slash interest rates yet again to prevent housing and credit problems from plunging the country into a recession.

The Fed chief made clear the central bank was prepared to act aggressively to rescue a weakening economy. "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," he said.

Stocks jumped after Bernanke said the Fed was ready to lower interest rates again to ward off a recession: "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," Bernanke said.

But they bobbled up and down before turning narrowly mixed after Kansas City Fed President Thomas Hoenig said later that inflation remains a concern and the stock market is "not the center of our attention." The comments kept alive fears that the Fed may not respond to investor concerns even as it monitors the weakening economy.

After seesawing earlier in the day, the Dow Jones industrials finished up nearly 120 points.

Some economists believe the Fed will slice its key interest rate by a bold half percentage point when the Fed meets next on Jan. 29 and 30. Others, however, think the Fed will go with a more modest one-quarter percentage point reduction, given concerns that high energy prices could spark inflation.

To bolster the economy, the Fed lowered its key rate three times last year. Its last cut on Dec. 11 left the rate at 4.25 percent, a two-year low. Still, Bernanke has come under criticism for not acting more aggressively to deal with the economy's problems.

Worries about the country's economic health have gripped voters, galvanized presidential candidates and spurred the White House and Congress to explore ways to stimulate the economy to avoid a recession.

Presidential historian Douglas Brinkley says this election could turn on whether we slide into recession, CBS News correspondent Anthony Mason reports.

"The bottom line: you're trying to get people to think they're gonna be better off with you in the White House than they are right now," Brinkley said.

The last recession was in 2001, after the dot com bubble burst, reports Mason.

Hiring practically ground to a halt in December, pushing the unemployment rate up to 5 percent, a two-year high, the government said in a report last week that rattled Wall Street and Main Street.

Bernanke, in a speech to a housing and economic forum here, cautioned against reading too much into one report. However, he said that if employment conditions were to continue to deteriorate, that would raise risks to the economy. The big worry is that consumers might cut back on their spending, sending the economy into a tailspin.

Incoming information suggests that the outlook for economic activity for this year has worsened and that the "downside risks to growth have become more pronounced," Bernanke warned.

A housing slump, weaker home values, harder-to-get credit and high energy prices all "seem likely to weigh on consumer spending as we move into 2008," Bernanke said.

"A broken mortgage market means a slow growing housing market, declining home values and a lethargic consumer. Without a consumer, there's no locomotive for American growth," Peter Morici, an economist at the University of Maryland, told Mason.

[logicanada]

Ever had a four-legged stool with one leg longer than the other? You cut one leg down and it still wobbles.
The interest rates are the saw and the economy is the stool. Maybe the floor isn''t level.
Better to make sure the floor is level and true before you end up with nothing but kindling.

[random_radar]

The Fed is the greatest business in the world! They get to legally print money and loan it to banks and the government at interest. If you or I did that, we would be convicted of counterfeiting.

[king77shaw]

gold is about to break $900 per ounce for the first time ever - of course, the mainstream media will give it little if any attention - what you don''t know will hurt you.

[omega39-2009]

Posted by brianbwb.

I agree, but other than admitting that "supply side" economics doesn''t work or coming clean and telling Americans that no matter how educated you are you can''t compete with someone who will work for $5 day, what have they got.

[omega39-2009]

75% of Americans are employed by small businesses. What you want is here, unless the LIBS tax them out of existence.

Posted by mbcsmith

Mbcsmith, I do not have time to verify the numbers but I wasn''t really talking about the number of jobs provided anyway, but instead the ethics of main street over the big box store. We have all heard the stories of Walmart selling items below cost to destroy the competition. We see a race to the bottom for prices fueled by mergers resulting in fewer choices and poorer services.

Remember when you pulled into a filling station and an attendant (gulp) filled your tank, checked your oil and washed your windshield?

In Chicago, every neighborhood had a small market, not only did they check you out and bag the items, they would also often deliver for free because they knew their customers had no car. I understand the concept of the buggy whip becoming obsolete but putting the labor on to the backs of the customer is ridiculous.

[demwatcher]

Ooh! lastdance7 is out cherry-picking again!

You''ll never hear him mention these Clinton Era gems: the House Banking Scandal, Whitewater, the Hawaii Bank Scandal, IMF Banking Scandal, Travelgate, Babbitt-gate, Rostenkowski post office scandal, Gore and the Chinese nuns fundraising scandal. And Last, but not least, the Clinton''s off-shore Cayman bank accounts that sucked $52 million from taxpayers.

You are too funny lastdance7. And too easy to blow out of the water. You left yourself WIDE open for that.

[mbcsmith]

This country did fine before the advent of multi-nationals and big box stores. I for one would prefer to see an economic resurgence of main street over Wall street.


--------------------------------------------------------------------------------

Posted by omega39 at 09:32 AM : Jan 11, 2008


75% of Americans are employed by small businesses. What you want is here, unless the LIBS tax them out of existence.

[watcher269-2009]

Yup, cut the rates even more and watch the Dollar sink to new lows.

I''m glad I invested in Euro''s.

[brianbwb-2009]

"...Any savings recognized by the consumer through lower interest rates will be offset by the inflationary pressures of a further weakened dollar. This may slow the inevitable slide of Wall street but will do little to increase consumer spending.
Posted by omega39

The consumer won''t see any savings, any excess liquidity will be soaked up by the big boys refinancing their debt, while borrowing to expand their slave labor camps in China, India, and Indonesia (to name a few). Any savings will become profit, they will not be passed to the consumer.

Back when America had a solid industrial base, such measures, while grossly inhuman, did act as a brake on inflation, but now are totally useless, except to multi millionaires and billionaires. Wall street will love it, but when the buzz wears off, they will still face the same problems.

The fed can lower interest to zero, (like they did in Japan a few times, it was unsuccessful then also) but the average consumer will never feel any change.

[omega39-2009]

Posted by mbcsmith

This country did fine before the advent of multi-nationals and big box stores. I for one would prefer to see an economic resurgence of main street over Wall street.

[omega39-2009]

The fed is pushing a string. Any savings recognized by the consumer through lower interest rates will be offset by the inflationary pressures of a further weakened dollar. This may slow the inevitable slide of Wall street but will do little to increase consumer spending.

[mbcsmith]

I see a lot of LIBS here who lambast the American corporation. Die corporations, die say the LIBS. Now I know LIBS react with emotion and NO thought or common sense but what would the LIBS do with the tens of millions that these companies employ, how would we replace the hundreds of billions of tax dollars they pay, or replace the health insurance they provide. I know LIBS don''t think much, but think about those things.

[mbcsmith]

I see a lot of LIBS here who lambast the American corporation. Die corporations, die say the LIBS. Now I know LIBS react with emotion and NO thought or common sense but what would the LIBS do with the tens of millions that these companies employ, how would we replace the hundreds of billions of tax dollars they pay, or replace the health insurance they provide. I know LIBS don''t think much, but think about those things.

[alphaa10-2009]

brianbwb-- Good points, all. Few Americans realize the extent of infrastructure decay that has set in during the Bush watch, as every loose dime went to the Iraq war, or to fund perks and tax breaks for the wealthy five percent Bush calls his "base". (Strange usage, here, reminding us bin Laden used "al Qaeda" with the same meaning.)

Globalism is embraced by both Democrats as well as Republicans, so both parties fail to recognize the typical American has been screwed over royally by public policy that writes a blank check to multinationals to offshore their assets, while getting tax breaks and incentives to do so.

Bush is a textbook example of a plundering political virus, ruining everything it touches. Bush has wasted the US economy, its industrial plant/assets, its currency, and now rides the housing bubble collapse both Greenspan and Beranke tried in vain to keep secret, while the hogs of Wall Street were still busy feeding.

[brianbwb-2009]

Posted by mcv57

I would be mildly interested on your take re my suggestions...

[brianbwb-2009]

Corrupt politicians should be removed, and sanctioned according to their violations of law, their assets seized, and returned to the treasury.

Collusion that results in overpriced housing, gasoline prices, and prices for other essential commodities should be also punishable be seizing of assets. The slumlords should lose their property rights, and the slum dwellers allowed to claim the property under the old settlement laws that assigned ownership to whoever made improvements on the land.

The Federal reserve should be just that, federal, not owned privately. No interest should be automatically charged on newly printed money, only after it is loaned should it collect interest, and a salary for work done is not a loan.

Apply "sin taxes" (guns, alcohol tobacco, gambling, prostitution, and pot, the world''s largest cash crop)to subsidize med school, in exchange for a bond to work for 4 years in a public, not for profit hospital, with published rates, and access for the poorest.

Allow public housing projects to be zonable for family owned businesses, and END ILLEGAL WARS.

I could go on, but I think you get the overall drift...
In essence, clean out the rot that corrupts America''s economy, reinstate regulations on capitalism, so that a dollar cannot be worth more than a life, and build for the future, the economy will repair itself.

[brianbwb-2009]

"You sound like a student of economics. Tell us professor, what would you do to turn this long haul back to solvency?"
Posted by mcv57

Thanks for asking.

There are infrastructure components that need repair, upgrading, and replacement, roads, schools, rail, airports, bridges, telecommunications, and many more, enough to provide gainful employment for all Americans, and then some. If we enforce the minimum wage, benefits and labor safety laws in this country, Americans will do the jobs now being done by Mexican semi slaves.

We need to rethink the concept of globalization, because until there is a uniform minimum living wage, all businesses will seek out the slave labor countries for labor. The world is not yet ready for it, so we should slow down the pace of relocation of US businesses to slave countries.

The "war economy" that we have been cursed with since after WW2 is no longer effective, the jobs created to make the machines are in the slave labor states, only the elite Americans see any benefit. We need to take back the money stolen by the war profiteers, seizing assets when necessary., and audit where the aid money we send to other countries is going, those who corrupt it, lose it, and no military aid to countries that already have an advanced military. (contd)...

[mcv57]

brianbwb,

You sound like a student of economics. Tell us professor, what would you do to turn this long haul back to solvency?

[brianbwb-2009]

Posted by jncc1701

You are technically correct, the only problem is that the US is not a free market economy, corruption, collusion, and nepotism have basically killed the concept of a free market. the real numbers over the last 35 years show only contraction, with temporary slowing of the rate of contraction hailed as "expansion".

[brianbwb-2009]

Cutting the rate will not help the economy, because corporations and banks will soak up the extra liquidity by refinancing already existing debt, and any investment capital is going to expand production in slave labor countries.

It will not improve America''s economy, it will not add one single job, or open one single new business, it will help no one except for the richest people, who need it least of all.

Stave off a recession? We have been in a 35 tear long recession, the propagandists'' bean counters have been flat out lying all this time. 5% unemployment? More like 25% without all the adjustments (lies).