It’s nice to see the Fed deal with the recession aggressively in their rate cut. Here’s a good summary from Bloomberg:

The Federal Reserve cut the main U.S. interest rate to as low as zero and said it will buy debt as the next step in combating the longest recession in a quarter-century and reviving credit. The Fed “will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability,” the Federal Open Market Committee said today in a statement in Washington. “Weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”

Here’s a good summary of economist commentary from WSJ/Real Time Economics blog in their post: Economists React: ‘Who Could Ask for Anything More?’

I pondered this action last week…..

We are now 0 to .25, the lowest federal funds rate ever and hopefully the beginning of noticeable stimulus to the economy. Of course, this fact is still to be determined by whether banks opt to start lending full scale soon rather than simply recapitalizing.

I am thinking we will see some thawing (on a small scale) in the first half of 2009, because lenders have to actually lend at some point (I know they are currently lending, but not enough to sustain their existence). If they don’t move forward, many will need to reinvent themselves (that is what the investment banks already did) fairly soon.

Aside: speaking of gambling, here’s the worst last name ever.

One Response to “[Almost Zero] It’s Now Or Never: Fed Needs To Use The Toolbox”

  1. Edd Gillespie says:

    “The deepening economic slump pushed unemployment to 6.7 percent last month, the highest level since 1993…” Bloomberg. So, focusing on the lenders and wall street will build jobs in the economy where the “rubber hits the road” and consumers will spend and everybody will make money and have new jobs? Frankly, I cotton to O’bama’s “bubble up” plan rather than the same old, same old “trickle down.” Most of my adult life has been lived in a under the trickle in our “trickle down” economy. But in times like these, when we are being dripped on instead of trickled on, and other times when the country has needed care and feeding, the government is forced to step in and get jobs, or money, or both directly to the workers. I don’t think I’m quite yet a communist, but golly guys, who is going to give the workers at Chrysler and GM a job if it isn’t the WPA? Sure the banks need to get with lending since lending is their lifeblood, but it looks like they don’t know that. Maybe they are looking for a way to hide their bailout profits. Can the money system even function now without doing all the crappy stuff it is accused of? So far this is all about “friends in high places.” Will January 20, 2009 be the first step in a retun to economic honesty and reality? It certainly does not appear that step has yet been taken.