WASHINGTON, Jan. 6, 2009
Fed: Bold Moves Won't Stop Economic Woes
Central Bank Fears Longterm Rut Despite Slashing Interest Rates And Vowing Other Radical Measures
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Last month, the Federal Reserve slashed its key interest rate to a record low. (CBS)
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Interest Rate At All-Time Low
In an attempt to boost the weak economy, the Federal Reserve cut interest rates to a record low of less than .25 percent. Alison Harmelin is at the New York Stock Exchange.
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Documents released Tuesday provided insights into the Fed's historic decision to ratchet down its rate to near zero from 1 percent at its Dec. 15-16 meeting. In the first action of its kind in the Fed's 95-year history, Fed Chairman Ben Bernanke and his colleagues created a target range for its rate, putting it at zero to 0.25 percent.
Despite the aggressive action, "the economic outlook would remain weak for a time and the downside risks to economic activity would be substantial," according to the Fed document.
In fact, Fed officials expected the economy would "contract sharply" in the final three months of 2008 and in "early 2009," the document said. Some participants suggested "the distinct possibility of a prolonged contraction, although that was not judged to be the most likely outcome."
Against that backdrop, Fed officials last month signaled rates would stay at record low levels for a while in an effort to cushion the blows from a recession that started in December 2007.
The housing, credit and financial debacles have badly hurt the economy. Problems have fed on each other, a vicious cycle that Bernanke and other policymakers have been desperately working to break.
Unemployment bolted to a 15-year high of 6.7 percent in November and is expected to hit 7 percent in December when the government releases that report on Friday. The economy has lost nearly 2 million jobs since the recession started. And, the Dow Jones industrial plunged nearly 34 percent in 2008, the worst showing since 1931.
Meanwhile, pending U.S. home sales fell to the lowest level on record in November, as the plummeting stock market and faltering economy caused buyers to delay their purchases, the National Association of Realtors said Tuesday.
Vanishing jobs and shrinking nest eggs have forced consumers to cut back sharply, jolting the economy into reverse. Many believe the economy fell backward at a rate of 5 to 6 percent in the final quarter of last year and is still shrinking.
Most Fed officials believed that the benefits of keeping rates "close to, but slightly above zero probably outweighed the adverse effects." The Fed didn't discuss those adverse effects but they would include the potential for spurring inflation down the road.
Fed officials thought it was important to let investors know that rates "were likely to stay exceptionally low for some time" because it could lead to a much-desired drop in longer-term interest rates. To that end, shortly after the Fed's December decision, mortgage rates started dropping sharply. Rates on 30-year mortgages fell to 5.1 percent, the lowest on records dating back to 1971, Freddie Mac reported last week.
In discussing the best strategy on rates at the December meeting, some members wondered whether the Fed should not set a target for its key rate, which would focus attention on the Fed's other efforts to turn around the ailing economy. But other members thought that not announcing a targeted interest rate might confuse investors.
In the end, the Fed officials agreed to create the new range - from zero to 0.25 percent. Fed officials decided it would be preferable to "communicate explicitly that it wanted federal funds to trade at very low rates."
In terms of other tools to aid the economy, the Fed discussed the benefits of buying longer-term Treasury and other securities. Many officials also thought the Fed should consider whether expanding some of its existing programs to provide loans or to buy debt would be helpful or whether new programs should be created.
The Fed on Monday started buying mortgage-backed securities, part of a program announced in November to help bolster the crippled housing market.
Fed officials at the December meeting also discussed possible refinements to its economic projections. It didn't provide details. No decisions were made on that front.
© MMIX, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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See all 99 CommentsThe amount of cash the US government is throwing at the world''s economies - Federal Reserve chairman Ben Bernanke can''t even guess at how much - is horrific beyond belief. Yet the real effect is of vast amounts more. Trillions more. Doomed? We are all utterly, utterly doomed!!!
THAT DOES NOT MATTER.
All that matters in today''s distorted and perverted marketplace is the size of the federal government BAILOUT.
As long as dumbya and the d-crats are around, the bailouts will continue non-stop.
The stock markets figured this out weeks ago - hence the on-going BAILOUT RALLY, reflecting the fact that no big company or union in the US can fail as long as the taxpayer dollars keep flowing to them.
Capitalism is dead; viva marxism!
Cutting interest rates to nearly zero and handing taxpayer money over to banks to "supposedly" open up credit, has not worked! And the Fed does not understand WHY?
Perhaps the Fed should begin printing money in pastel colors instead of the usual green? Perhaps the Fed should create a $43 bill with George W Bush''s picture on it (he would like that!)? Maybe the Fed should hand out free tickets to the next Hannah Montana concert to the first bank which uses its "rescue" money to really open up credit?
Or maybe the Fed has just been giving the money to the wrong people in the first place?
SIG HEIL, I WANT TO MAKE SURE THAT ALL MY CORPORATE FRIENDS ARE DIRTY, STINKING RICH WHEN I LEAVE OFFICE!!!, BUSH!!!
As long as they keep passing out money to millionaires and billionaires WHO DON''T NEED IT, the situation will never get better.
HOW ABOUT A "BAILOUT" FOR THE AVERAGE AMERICAN???
Posted by txgrouch2008
LOLOLOL!!! How ''bout we just exchange a proposed tariff on imported ''goods'' from China, for pay-down of debt owed to them before we all have to learn Chinese.
(I wouldn''t call anything imported from China ''goods'' with their given media coverage of poisons and harmful items sent to the US - maybe we should classify them as mere ''product...of danger'')
tsh...we''d pay them back in a year with all the cr*p people buy that''s ''made in China''
Most applicants failed it. Most teachers remember it as a "really hard" test.
Here''''s the kind of question it had:
Read the following sentence and choose the true statement, based on the information given in the sentence:
"On Tuesday, Mary was carryng an umbrella because it was raining."
Only one of the following statements is TRUE. Which one is it?
1. It rains every Tuesday.
2. Mary always carries an umbrella.
3. Mary''''s umbrella is black.
4. Mary normally carries an umbrella if it rains.
5. It rains only on Tuesdays.
The test has 50 questions like that. Most teachers struggle to get more than half of them right.
Posted by txgrouch2008 at 10:36 PM : Jan 05, 2009
I saw this last night.
That is scary if most teachers are struggling to get the questions right.
The answer is #3, of course!!
Just kidding.:)
His "chicken little" performance also helped exacerbate the condition.
This is a global market now...time has changed. Imposing tariff means declaring trade wars. Back then we had the edge in technology...other countries have to buy from us. After decades of deteriorating education (jocks are cool while nerds are...not), our high tech industries rely heavily on foreign talents. Besides, Japan, China, and Saudi are the big three treasury debts holders. Our American dreams are financed by them. Protectionism will not work. They can always stop buying American made products and stop financing our American dreams and we will see double digits mortgage rate in no time.
The result - by 1913 we were an industrial superpower.
TARIFFS BROUGHT PROSPERITY.
TARIFFS CAN BRING PROSPERITY BACK.
Posted by txgrouch2008 at 08:10 PM : Jan 06, 2009
What about products that require raw materials that we would be imposing tariffs on?
Posted by irmcvet971 at 08:33 PM : Jan 06, 2009
If you look at economic history, the best conservatives have been able to come up with is slow growth, but stagnation is the norm.
Doo dah, doo dah!
Blago gonna sing like a canary!
Oh de doo dah day.
Blago gonna sing all day,
Blago gonna sing all night!
Demmycrats gotta SHUT HIM UP,
All the live long day.
Demmycrats gonna DRAG THEIR FEET
Doo dah, doo dah!
Demmycrats gonna DRAG THEIR FEET
Day dowanna hear da canary sing.
CUZ THEIR NAME IS IN THE SONGGGGGGG!
And that''''''''s the truth-th-th-th-th...
Posted by txgrouch2008
What the heck is this?
Writing your own songs now?
ONLY by dissolving the Criminal Federal Reserve and returning to the issuance of currency, based on a Gold Standard, by our Government, can we begin to reverse the drunken spending habits of our Criminal Congress and Senate.
Spending within budgetary boundries should be mandated by Iron Clad legal language, where no "Secret" budgets by any agency of the Government, including the NSA, CIA, NIA, Pentagon, Department of Giveaways to Fat Cat Buttweasles and Scumbags,(GFCBS), or anyone else, will be tolerated, under severe, unpardonable, mandatory, *penalty of law.
*(Life Sentence in a "Don''t Drop the Soap" Prison)
Hey grouchie, you should consider yourself grateful that your wife didn''t do this to you.:) hahahahaha
Hey grouchie, you should consider yourself grateful that your wife didn''''t do this to you.:) hahahahaha
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Posted by erasmus606 at 09:28 PM : Jan 06, 2009
+ report abuse
That guy broke the first rule of being a "Guy":
NEVER, UNDER ANY CIRCUMSTANCES, go to sleep with a Crazy Woman in the house. It''s so simple, you''d think no one could forget it, but.....
Posted by stinginrich at 09:31 PM : Jan 06, 2009
Maybe at the time he didn''t know she was crazy. Maybe that was when he realized she was crazy.
Sometimes it''''s real hard to avoid - when she''''s YOUR WIFE.
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Posted by txgrouch2008 at 09:33 PM : Jan 06, 2009
+ report abuse
My point exactly. "Guy" Rule #2: "NEVER, under ANY circumstances, get married.
Maybe at the time he didn''''t know she was crazy. Maybe that was when he realized she was crazy.
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Posted by erasmus606 at 09:34 PM : Jan 06, 2009
+ report abuse
"Guy" Rule #3: ALL women are crazy.
Posted by stinginrich at 09:35 PM : Jan 06, 2009
And what''s rule #3? How many are there?
Posted by txgrouch2008 at 09:36 PM : Jan 06, 2009
I jumped to this one because the other one disappeared. Not only that, there isn''t anyone there!
And what''''s rule #3? How many are there?
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Posted by erasmus606 at 09:37 PM : Jan 06, 2009
+ report abuse
"Guy" Rule #3: ALL women are crazy.*
*(except for you, erasmus, you''re nice) :0)
Posted by stinginrich at 09:36 PM : Jan 06, 2009
Are you trying to hurt my feelings?
Posted by txgrouch2008 at 09:37 PM : Jan 06, 2009
Someone probably did, but I have a sneaking hunch you don''t listen very well.:)
Domestic raw materials producers - LIKE STEEL FOR EXAMPLE - might become more competitive, so they could afford to modernize and pay higher wages.
It''''s really amazing how many people are so accustomed to NOT MAKING THINGS HERE that they seem to think it''''s NOT POSSIBLE to make things here.
Like, they take it for granted that it''''s physically impossible to make a TV set or a STEEL I-BEAM here. They just ASSUME that we have to import things like that...
Posted by txgrouch2008 at 09:20 PM : Jan 06, 2009
It sounds to me that you are talking about dependency theory. And whether you know it or not, this theory is based in Karl Marx ideology.
Posted by stinginrich at 09:36 PM : Jan 06, 2009
Tucker, is that you?
Posted by txgrouch2008 at 09:38 PM : Jan 06, 2009
HAHAHAHAHAHAHAHA!
Posted by stinginrich at 09:39 PM : Jan 06, 2009
Ahhh, that''s nice.:) BUT, there are SOME that don''t think so.
Posted by erasmus606 at 09:39 PM : Jan 06, 2009
I can still see it. Maybe now they''''re shutting YOU out.
Posted by txgrouch2008 at 09:42 PM : Jan 06, 2009
I meant it disappeared off the front and when I went to it, the only one there was....?... I forget his name.
Posted by erasmus606 at 09:42 PM : Jan 06, 2009
How did you know that?
Posted by txgrouch2008 at 09:44 PM : Jan 06, 2009
Just a really, really, WILD guess.
Posted by txgrouch2008 at 09:49 PM : Jan 06, 2009
Hahaha. Now you are being sarcastic.
Like Barack basically dangled a carrot of business tax cuts in front of the Repubs and because they''re greedy they took the bait, but in return didn''t they basically trade off the ability to criticize if say we get in a situation of stagflation?
Barack doesn''t like confrontation and drama, so he''d never think waging battle with Repubs would be the way to revise trade relationships, right? Like wouldn''t he have to show that all the old-fashioned ideas sucked before all the powerful people were primed for considering new ideas?
I hope that''s his plan . . . I think it is - something like that anyways (?)
You are not a man either!~ A hermaprodite maybe?
Posted by remrafbn at 10:00 PM : Jan 06, 2009
HAHAHAHAHA!
:( Sorry, grouchie.:)
Posted by erasmus606 at 10:03 PM : Jan 06, 2009
Hahahaha
Posted by txgrouch200
Congress enacted the nation''s first income tax law in 1862.
Posted by txgrouch2008 at 10:23 PM : Jan 06, 2009
Someone else has just added their 2 cents worth.:)
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