Cut historic rates by the Fed's 75 points puts the U.S. in uncharted monetary policy
| Date: December 16, 2008 | Source: Economic @ 21 |
| Category: Economy | |
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Loading ... Today, the Federal Open Market Committee of the U.S. Federal Reserve has decided to reduce interest rates by at least 75 basis points to set the rate in a target range between zero and 0.25%, its lowest level since that interest rates became the main monetary policy tool of the U.S. central bank.
This is hosted by the North American market with euphoric rises, sending the Dow Jones rises more than 4% as investors discounted hikes of 50 basis points by the institution you head Ben Bernanke.
This rate cut is already 500 basis points cut that carried in the last fifteen months in an attempt to halt the deterioration in economic activity.
The decision to drop at least those 75 points could have been undertaken as a desperate measure to tackle the crisis with a claw trying to revive the economy and consumption in the U.S., which is interpreted positively by the effort that is done, but leaves open a major unknown, since it has exhausted its main source of control in the Fed's monetary policy to redirect market expectations. Obviously you have other weapons, but the main and most powerful seems to be consumed at the U.S. enters into uncharted territory in terms of monetary policy is concerned, to now be in a new historical situation.
This news add another regarding the credit situation that crosses the Federal Reserve ( FED ), which according to various published media, if it were a commercial bank would be technically bankrupt, since according to these requirements, you must have minimum capital of 2% on the loans granted, which according to this requirement, the Fed does not meet the minimum reserves which must follow any financial institution. Specifically, barely 1.9% of its assets. Currently, the Fed needs almost 48,000 million dollars to recover the capital ratio that is required of commercial banks by Gerald P. O'Driscoll, a member of the Cato Institute and former vice president of the Dallas Fed.
The institution he leads Ben Bernanke is flooding the market with dollars in order to save the country's financial system. However, its balance sheet, ie, the total volume of loans granted by the Federal Reserve, has tripled in recent months to levels not seen before: from 900,000 million to almost 3 trillion today. If this amount are added liquidity injections applied by the U.S. Treasury, the total bill of the mega-bailout amounts to astronomical figures, close to 8.5 billion. Nearly 60% of U.S. GDP.
With the measures taken and the limited room for maneuver which is now the EDF , the true short-term result will be the likely collapse of the dollar against the euro, which places the switch today at $ 1.406 per euro traded at least until see if the ECB's decision moves in line with similar or equivalent monetary policy aggressively talking.
Separating what is true of what could be, the main course could be, hang on, the resurgence of news feed conspiranóicas voices that talk about this already planned and that you are looking for is not intended to reactivate the aconomía , also, but a hidden agenda, which seeks to devalue the dollar against other world currencies, to release the Amero as currency saving, paying off foreign debt, especially with China, and revive the economy. The Amero is already an urban legend in the network, but the fact remains that begin to fulfill the conditions must be met for supposedly being able to carry out this hypothesis.
With this, I would like to open a line of discussion on what you think about it, that is, if the Fed actually remaining resources to revive the economy or otherwise consuming them at an accelerated pace is seeing that the effects last only in the short term and there is no other solution in the long run than a new world economic order. What do you think?
December 20, 2008 at 15:01
[...] Barriers closing the week at 3.257% from 3.47% last week. Meanwhile, the U.S. Federal Reserve decided to again cut interest rates ... and the Bank of Japan also cut down this week [...]