Fed launches bold $1.2 TRILLION effort to revive economy
+4
HotParadox
Peregrine(Endangered)
Jax74
Susan aka CV
8 posters
Page 1 of 1
Fed launches bold $1.2 TRILLION effort to revive economy
i'm posting this - but reading it - the headline was enough for me.
i don't even know what to say anymore.
CV
Fed launches bold $1.2T effort to revive economy
By JEANNINE AVERSA
WASHINGTON (AP) - With the country sinking deeper into recession, the Federal Reserve launched a bold $1.2 trillion effort Wednesday to lower rates on mortgages and other consumer debt, spur spending and revive the economy.
To do so, the Fed will spend up to $300 billion to buy long-term government bonds and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.
Fed Chairman Ben Bernanke and his colleagues wrapped a two-day meeting by leaving a key short-term bank lending rate at a record low of between zero and 0.25 percent. Economists predict the Fed will hold the rate in that zone for the rest of this year and for most - if not all - of next year.
The decision to hold rates near zero was widely expected. But the Fed's plan to buy government bonds and the sheer amount - $1.2 trillion - of the extra money to be pumped into the U.S. economy was a surprise.
"The Fed is clearly ready, willing and able to be the ATM for the credit markets,'' said Terry Connelly, dean of Golden Gate University's Ageno School of Business in San Francisco.
Wall Street was buoyed. The Dow Jones industrial average, which had been down earlier in the day, rose 90.88, or 1.2 percent, to 7,486.58. Broader indicators also gained.
And government bond prices soared. Heralding a coming drop in mortgage rates, the yield on the benchmark 10-year Treasury note dropped to 2.50 percent from 3.01 percent - the biggest daily drop in percentage points since 1981.
The dollar, meanwhile, fell against other major currencies. In part, that signaled concern that the Fed's intervention might spur inflation over the long run.
If the credit and financial markets can be stabilized, the recession could end this year, setting the stage for a recovery next year, Bernanke has said in recent weeks. The Fed chief and his colleagues again pledged to use all available tools to make that happen, and economists expect further steps in the months ahead.
Since the Fed last met in late January, "the economy continues to contract,'' Fed policymakers observed in a statement they issued Wednesday.
"Job losses, declining equity and housing wealth and tight credit conditions have weighed on consumer sentiment and spending,'' they said.
The Fed's announcement that it will spend up to $300 billion over the next six months to buy long-term government bonds was something that in January it had hinted it would do. But some officials had seemed to back off from the idea in recent weeks.
Such action is designed to boost Treasury prices and drive down their rates, as it did Wednesday. Rates on other kinds of debt are likely to fall as well.
"This is going to help everybody,'' said Sung Won Sohn, economist at the Martin Smith School of Business at California State University. "This might help the Fed put Humpty Dumpty back together again.''
The last time the Fed set out to influence long-term interest rates was during the 1960s.
The Fed's decision to buy an additional $750 billion in mortgage-backed securities guaranteed by Fannie and Freddie comes on top of $500 billion in such securities it's already buying. It also will double its purchases of Fannie and Freddie debt to $200 billion.
Since the initial Fannie-Freddie program was announced late last year, mortgage rates have fallen. Rates on 30-year mortgages now average 5.03 percent, down from 6.13 percent a year ago, according to Freddie Mac. The Fed's decision to expand the program could further reduce rates, analysts said.
``This is not only going to keep mortgage rates low for a long period of time,'' said Greg McBride, a senior financial analyst at Bankrate.com. ``The mere announcement may produce a honeymoon effect and bring mortgage rates down to even lower levels in the coming days.''
The goal behind all the Fed's moves is to spur lending. More lending would boost spending by consumers and businesses, which would revive the economy.
The Fed also said it would consider expanding another $1 trillion program that's being rolled out this week. That program aims to boost the availability of consumer loans for autos, education and credit cards, as well as for small businesses.
Where does the Fed get all the money? It prints it.
The Fed's series of radical programs to lend or buy debt has swollen its balance sheet to nearly $2 trillion - from just under $900 billion in September. Sohn believes the Fed's balance sheet could grow to $5 trillion over the next two years.
The Fed has said it's mindful of the risks of pumping more money into the economy, bailing out financial institutions and leaving a key rate near zero for too long. There's the potential to plant the seeds for higher inflation, put ever-more taxpayer money at risk and encourage ``moral hazard.'' That's when companies make high-stakes gambles knowing the government stands ready to rescue them.
Across the Atlantic, the Bank of England last week began buying government bonds from financial institutions as it turned to new ways to help revive Britain's moribund economy. The Bank of England, like the Fed, already had lowered its key interest rate to a record low of 0.5 percent.
Finance leaders from top economies have discussed coordinating actions from their governments and central banks to provide a more potent punch against the global financial crisis.
The Fed is taking the new steps as the U.S. economy sinks deeper into recession. Businesses are facing weaker sales prospects as customers in the United States and abroad cut back, the policymakers said.
Still, the Fed said it hoped its actions, the government's bank rescue effort and President Barack Obama's $787 billion stimulus of increased government spending and tax cuts eventually will help revive the economy.
"Although the near-term economic outlook is weak, the committee anticipates that policy actions .... will contribute to a gradual resumption of sustainable economic growth,'' the Fed said.
But even in this best-case scenario, the nation's unemployment rate - now at quarter-century peak of 8.1 percent - will keep climbing. Some economists think it will hit 10 percent by the end of this year.
The recession, which began in December 2007, already has snatched a net total of 4.4 million jobs and has left 12.5 million searching for work.
http://netscape.compuserve.com/news/story.jsp?floc=FF-APO-1310&idq=/ff/story/0001%
03/19/09 01:38 © Copyright The Associated Press. All rights reserved. The information contained In this news report may not be published, broadcast or otherwise distributed without the prior written authority of The Associated Press.
i don't even know what to say anymore.
CV
Fed launches bold $1.2T effort to revive economy
By JEANNINE AVERSA
WASHINGTON (AP) - With the country sinking deeper into recession, the Federal Reserve launched a bold $1.2 trillion effort Wednesday to lower rates on mortgages and other consumer debt, spur spending and revive the economy.
To do so, the Fed will spend up to $300 billion to buy long-term government bonds and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.
Fed Chairman Ben Bernanke and his colleagues wrapped a two-day meeting by leaving a key short-term bank lending rate at a record low of between zero and 0.25 percent. Economists predict the Fed will hold the rate in that zone for the rest of this year and for most - if not all - of next year.
The decision to hold rates near zero was widely expected. But the Fed's plan to buy government bonds and the sheer amount - $1.2 trillion - of the extra money to be pumped into the U.S. economy was a surprise.
"The Fed is clearly ready, willing and able to be the ATM for the credit markets,'' said Terry Connelly, dean of Golden Gate University's Ageno School of Business in San Francisco.
Wall Street was buoyed. The Dow Jones industrial average, which had been down earlier in the day, rose 90.88, or 1.2 percent, to 7,486.58. Broader indicators also gained.
And government bond prices soared. Heralding a coming drop in mortgage rates, the yield on the benchmark 10-year Treasury note dropped to 2.50 percent from 3.01 percent - the biggest daily drop in percentage points since 1981.
The dollar, meanwhile, fell against other major currencies. In part, that signaled concern that the Fed's intervention might spur inflation over the long run.
If the credit and financial markets can be stabilized, the recession could end this year, setting the stage for a recovery next year, Bernanke has said in recent weeks. The Fed chief and his colleagues again pledged to use all available tools to make that happen, and economists expect further steps in the months ahead.
Since the Fed last met in late January, "the economy continues to contract,'' Fed policymakers observed in a statement they issued Wednesday.
"Job losses, declining equity and housing wealth and tight credit conditions have weighed on consumer sentiment and spending,'' they said.
The Fed's announcement that it will spend up to $300 billion over the next six months to buy long-term government bonds was something that in January it had hinted it would do. But some officials had seemed to back off from the idea in recent weeks.
Such action is designed to boost Treasury prices and drive down their rates, as it did Wednesday. Rates on other kinds of debt are likely to fall as well.
"This is going to help everybody,'' said Sung Won Sohn, economist at the Martin Smith School of Business at California State University. "This might help the Fed put Humpty Dumpty back together again.''
The last time the Fed set out to influence long-term interest rates was during the 1960s.
The Fed's decision to buy an additional $750 billion in mortgage-backed securities guaranteed by Fannie and Freddie comes on top of $500 billion in such securities it's already buying. It also will double its purchases of Fannie and Freddie debt to $200 billion.
Since the initial Fannie-Freddie program was announced late last year, mortgage rates have fallen. Rates on 30-year mortgages now average 5.03 percent, down from 6.13 percent a year ago, according to Freddie Mac. The Fed's decision to expand the program could further reduce rates, analysts said.
``This is not only going to keep mortgage rates low for a long period of time,'' said Greg McBride, a senior financial analyst at Bankrate.com. ``The mere announcement may produce a honeymoon effect and bring mortgage rates down to even lower levels in the coming days.''
The goal behind all the Fed's moves is to spur lending. More lending would boost spending by consumers and businesses, which would revive the economy.
The Fed also said it would consider expanding another $1 trillion program that's being rolled out this week. That program aims to boost the availability of consumer loans for autos, education and credit cards, as well as for small businesses.
Where does the Fed get all the money? It prints it.
The Fed's series of radical programs to lend or buy debt has swollen its balance sheet to nearly $2 trillion - from just under $900 billion in September. Sohn believes the Fed's balance sheet could grow to $5 trillion over the next two years.
The Fed has said it's mindful of the risks of pumping more money into the economy, bailing out financial institutions and leaving a key rate near zero for too long. There's the potential to plant the seeds for higher inflation, put ever-more taxpayer money at risk and encourage ``moral hazard.'' That's when companies make high-stakes gambles knowing the government stands ready to rescue them.
Across the Atlantic, the Bank of England last week began buying government bonds from financial institutions as it turned to new ways to help revive Britain's moribund economy. The Bank of England, like the Fed, already had lowered its key interest rate to a record low of 0.5 percent.
Finance leaders from top economies have discussed coordinating actions from their governments and central banks to provide a more potent punch against the global financial crisis.
The Fed is taking the new steps as the U.S. economy sinks deeper into recession. Businesses are facing weaker sales prospects as customers in the United States and abroad cut back, the policymakers said.
Still, the Fed said it hoped its actions, the government's bank rescue effort and President Barack Obama's $787 billion stimulus of increased government spending and tax cuts eventually will help revive the economy.
"Although the near-term economic outlook is weak, the committee anticipates that policy actions .... will contribute to a gradual resumption of sustainable economic growth,'' the Fed said.
But even in this best-case scenario, the nation's unemployment rate - now at quarter-century peak of 8.1 percent - will keep climbing. Some economists think it will hit 10 percent by the end of this year.
The recession, which began in December 2007, already has snatched a net total of 4.4 million jobs and has left 12.5 million searching for work.
http://netscape.compuserve.com/news/story.jsp?floc=FF-APO-1310&idq=/ff/story/0001%
03/19/09 01:38 © Copyright The Associated Press. All rights reserved. The information contained In this news report may not be published, broadcast or otherwise distributed without the prior written authority of The Associated Press.
Susan aka CV- Number of posts : 380
Location : Connecticut - for now anyway
Registration date : 2009-02-28
Re: Fed launches bold $1.2 TRILLION effort to revive economy
CV, Pretty soon we will be hearing about gov plans to spend a kajillion bajillion dollars on this or that and it will be no big deal to them. They will be so broke and in debt they will have to borrow money to keep the printing presses running to print more money.
From now on every time a new bail out is announced they aught to play the theme from the Benny Hill show in the background.
From now on every time a new bail out is announced they aught to play the theme from the Benny Hill show in the background.
Jax74-
Number of posts : 37
Age : 49
Registration date : 2009-03-09
Re: Fed launches bold $1.2 TRILLION effort to revive economy
I've gotten so disgusted with it all...I don't even want to read or hear the news for awhile...I do go to WhiteHouse.gov and email my concerns for any good that it will do.
Peregrine(Endangered)-
Number of posts : 1132
Age : 82
Location : Delaware
Job/hobbies : Gardening, Birding
Humor : lots
Registration date : 2009-01-13
Re: Fed launches bold $1.2 TRILLION effort to revive economy
why stop here? just keep on printing bogus money till we run out of the 'special' paper they print it on. the paper is now the only thing about our money that has any actual value to it and i guess when they exhaust the paper supply, this nonsense will finally stop. of course, we'll be a defunct nation when that happens and that seems to be their course of choice.
HotParadox-
Number of posts : 4051
Location : Boston
Registration date : 2009-01-13
Re: Fed launches bold $1.2 TRILLION effort to revive economy
Money isn't made out of paper; it's made out of cotton.
Quess who's in the money: cotton growers...see someone always benefits no matter what is going on in the world
Quess who's in the money: cotton growers...see someone always benefits no matter what is going on in the world
Peregrine(Endangered)-
Number of posts : 1132
Age : 82
Location : Delaware
Job/hobbies : Gardening, Birding
Humor : lots
Registration date : 2009-01-13
Re: Fed launches bold $1.2 TRILLION effort to revive economy
Peregrine(Endangered) wrote:Money isn't made out of paper; it's made out of cotton.
Quess who's in the money: cotton growers...see someone always benefits no matter what is going on in the world
I think I've just fallen in love...
Sir Bonvolio-
Number of posts : 315
Age : 36
Location : Epsom
Job/hobbies : Bar Manager
Humor : The darker the better
Registration date : 2009-02-22
Re: Fed launches bold $1.2 TRILLION effort to revive economy
Glenn Beck and his guest Walter Zimmerman tell you why the fed did this, explain exactly what it's designed to do, and lay out the just how risky this move is...
All bullshit aside... After watching this, I've got to tell you all that I'm more than a little worried about this situation.
Please... Everyone take the time to watch this and let me know your take on it.
If you can't view the video, click the link below.
https://www.youtube.com/watch?v=2zSrNcOE66o
All bullshit aside... After watching this, I've got to tell you all that I'm more than a little worried about this situation.
Please... Everyone take the time to watch this and let me know your take on it.
If you can't view the video, click the link below.
https://www.youtube.com/watch?v=2zSrNcOE66o
Grim17-
Number of posts : 430
Age : 59
Location : Phoenix, Arizona
Registration date : 2009-01-17
Re: Fed launches bold $1.2 TRILLION effort to revive economy
You want to know what I think....
I think we're fucked.
I have been saying for a while now that our spending is the problem.
Not to be too geeky...but spending is like the dark side of the force. (Yes i am making a star wars reference) It's easier, it's more seductive...it's the faster route to higher approval ratings. But it is not correct or the best way to run a government. In fact there is NO future in it as we're seeing. I say that with confidence because we simply can NOT print money forever to fix our problems.
Just imagine if the last three republican presidents had reduced spending like they should have. What if they all created a budget surplus or even just balanced the budget! Clinton managed it...so if the republicans hadn't been so stupid we'd be looking at 28 years of a balanced budget or surplus dollars.
How hard do you think it would be to fix this mess if that had been the case? What if uncle sammy had planned for the future? Just in case...saved up a trillion dollars in that period of time.
In that situation printing a little money to help the private sector would be a temporary thing. Instead we're in reactionary mode. Our incompetent are making gigantic decisions off the cuff hoping and praying it will work.
I agree with Grim that there are philosophical differences between the right and left...and economically speaking there is no future in high spending liberal philosophies. It's just unfortunate that the last three republicans in office have been high spending liberals when it came to their economic policy.
I think we're fucked.
I have been saying for a while now that our spending is the problem.
Not to be too geeky...but spending is like the dark side of the force. (Yes i am making a star wars reference) It's easier, it's more seductive...it's the faster route to higher approval ratings. But it is not correct or the best way to run a government. In fact there is NO future in it as we're seeing. I say that with confidence because we simply can NOT print money forever to fix our problems.
Just imagine if the last three republican presidents had reduced spending like they should have. What if they all created a budget surplus or even just balanced the budget! Clinton managed it...so if the republicans hadn't been so stupid we'd be looking at 28 years of a balanced budget or surplus dollars.
How hard do you think it would be to fix this mess if that had been the case? What if uncle sammy had planned for the future? Just in case...saved up a trillion dollars in that period of time.
In that situation printing a little money to help the private sector would be a temporary thing. Instead we're in reactionary mode. Our incompetent are making gigantic decisions off the cuff hoping and praying it will work.
I agree with Grim that there are philosophical differences between the right and left...and economically speaking there is no future in high spending liberal philosophies. It's just unfortunate that the last three republicans in office have been high spending liberals when it came to their economic policy.
JReed-
Number of posts : 112
Location : Milwaukee
Job/hobbies : Ironman
Registration date : 2009-02-22
Re: Fed launches bold $1.2 TRILLION effort to revive economy
hi grim.. do you happen to have a copy of zimmerman's "best and worst of" information that beck ask him for? is so, can you please post them here - and if not, can you tell me where to find it?Grim17 wrote:Glenn Beck and his guest Walter Zimmerman tell you why the fed did this, explain exactly what it's designed to do, and lay out the just how risky this move is...
All bullshit aside... After watching this, I've got to tell you all that I'm more than a little worried about this situation.
Please... Everyone take the time to watch this and let me know your take on it.
thanks,
CV
Susan aka CV- Number of posts : 380
Location : Connecticut - for now anyway
Registration date : 2009-02-28
Re: Fed launches bold $1.2 TRILLION effort to revive economy
Susan aka CV wrote: hi grim.. do you happen to have a copy of zimmerman's "best and worst of" information that beck ask him for? is so, can you please post them here - and if not, can you tell me where to find it?
thanks,
CV
I sure don't CV...
He was supposed to post it on his website, but it isn't there. I checked yesterday also.
Other than that, what was your take on that interview?
Grim17-
Number of posts : 430
Age : 59
Location : Phoenix, Arizona
Registration date : 2009-01-17
Re: Fed launches bold $1.2 TRILLION effort to revive economy
my take is that we're screwed.
the politicians are going to run us right into the ground.
I was explaining this to my bro-in-law and he is an Obama supporter. his basic response was that hyper deflation or inflation can't happen to the US. But he couldn't give any reason. just blind hope in his savior.
I wish I could live in blissful ignorance, but my education and economics classes won't allow that. We're screwed.
the politicians are going to run us right into the ground.
I was explaining this to my bro-in-law and he is an Obama supporter. his basic response was that hyper deflation or inflation can't happen to the US. But he couldn't give any reason. just blind hope in his savior.
I wish I could live in blissful ignorance, but my education and economics classes won't allow that. We're screwed.
JReed-
Number of posts : 112
Location : Milwaukee
Job/hobbies : Ironman
Registration date : 2009-02-22
Re: Fed launches bold $1.2 TRILLION effort to revive economy
Is it possible that the United States is heading in the same direction that Hugo Chavez is taking his country. If something isn't done to stop this runaway train that we are on, the resulting collision will be the death of our freedom, forever.
Old Timer-
Number of posts : 4718
Registration date : 2009-01-13
Re: Fed launches bold $1.2 TRILLION effort to revive economy
Old Timer wrote:Is it possible that the United States is heading in the same direction that Hugo Chavez is taking his country. If something isn't done to stop this runaway train that we are on, the resulting collision will be the death of our freedom, forever.
I have never been an alarmist, but when you combine his over the top spending, all the social programs he wants to implement despite the economy, and the soft stance he's taken with our enemies, It's hard not to worry about the future of America.
When it comes to his socialist plans for the country, I've heard that once you implement social programs in any country, it's nearly impossible to terminate them. So if he gets what he wants, there's no turning back. The America we know and love, will be lost forever.
Grim17-
Number of posts : 430
Age : 59
Location : Phoenix, Arizona
Registration date : 2009-01-17
Similar topics
» CBO Report: $1 trillion deficits estimated for each of next 10 years
» Cavuto admits he was wrong on the economy and government spending
» HOW TO FIX THE ECONOMY
» Bloomberg: Some banks must die, so our economy can live
» Did Obama intentionally nuke the economy?
» Cavuto admits he was wrong on the economy and government spending
» HOW TO FIX THE ECONOMY
» Bloomberg: Some banks must die, so our economy can live
» Did Obama intentionally nuke the economy?
Page 1 of 1
Permissions in this forum:
You cannot reply to topics in this forum