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Originally Posted by outlaw2001it  What makes things even worse is Bernanke is going to give investors a heads up of what the Fed will do in the future in regards to rate cuts, or anything else. The Fed is saying the reason they are going to do this is to give the market a heads up so investors can prepare for what lies ahead. So the way I see it is, when the Fed says they will raise the interest rates next month, investors are going to dump stocks, and take their earnings depriving the U.S. government of extra money from taxes accumulated on those stocks. So the way I see it is, the Fed doesn't want to take money from the rich, but they will take it from the middle to lower class in a heartbeat.
I expect the Fed to raise the interest rate this month, or next because right now there is nothing that is going to help the housing market except time. I feel sorry for the first time buyers that lost houses, but for everybody else that wanted to make money off of their investments...I'm glad they got screwed. The Fed should not have bailed them out by cutting the key interest rate, and lowering the dollar to insignificant levels. Even though the low dollar is helping exports, it is however not showing any progress because of the higher price of oil, and the higher price of imports. It will take another six months to really figure out what the heck is going on with our economy with regards to the weak dollar, and the housing market; unless the Fed does raise the key interest rate this month, or next. |
The Fed (or Federal Gov't for that matter) doesn't raise or lower interest rates, that is a common misconception.
The market economy raises or lowers Interest rates. What if people don't have confidence in US $dollar's future --what happens to interest rates to reward that increased risk taking? What if "lowering" the Fed Overnite or Interbank rate De-minishes confidence in Dollar and raises further fears of inflation. What happens to interest rates then -- to induce that increased risk taking and deminisished value of Dollar?
I understand why this misconception is so common --because the Fed and the Federal Gov't claims it and the media disseminates it.
What the Central Bank does is to increase the money supply or decrease the money supply. Since the Federal Gov't is the biggest debtor, it is happy to see rates cut, and to see a false sense of "all right with the Country and World" because it doesn't want to get the feedback if people knew the truth.
This is a propensity of both "Parties", which are indeed partying while the middle class is clobbered and burdened --but still blissfully "happy" as their stocks are still up becuse 90-day T-bills don't pay as much, or their variable stock-invested 401-K's is relatively high. For now.
Until there is a
general re--pricing in regards to affordability of Housing and productivity of Business. Guess which direction that will most likely be, given the gross disparity between Federal revenue and expeditures.
Some people here even suggested that those who favor a tax surcharge to pay for the Iraqui War were just being "anti-war". Unpatriotic ? Don't recall. Of course there are promises that can't be kept in regard to Katrina. The not-that-far-off need to pay off those Funny Money scripts the Treasury wrote to the Social Security Administration to "borrow" (another word for spend) its temporary surplus.
Bush vetoes a spending Bill that provideds for how it will be payed for. Yet Congress overides another Bill that doesn't give a hint about who's going to pay for it or how. More borrowing? More creation of money to borrow? Something wrong in the State of Confusion ?
Again:
the Fed makes or destroys money; the market economy sets interest rates.
Right now it's making money. Why? It's nicer that way.
MegalosSkylaki