[KaBar67]

Reich is a liberal tool. I can use the word again I think. I googled "spending down, savings up" and got this. (Or vise versa). His point about a "bottom up" recovery makes sense to me. If Reich and Schiff agree on consumer spending not being good if it puts you in debt, I will listen. Hense, why are we trying to keep interest rates so low? I don't get that at all. But savings seems to be the right thing now.


http://robertreich.blogspot.com/2008/11/bottom-up-bailout-rather-than-trickle.html

Also see link to "We Did Good!" Thread http://www.survivalistboards.com/showthread.php?t=37173

 

[danpauselius]

You have to understand what happens when the Fed lowers the rate. First, they don't actually lower the rate, they create a situation which will cause rates to fall. They've pretty much made a science out of figuring out how much printing is necessary to achieve a particular rate. Here's how it works:

The Fed decides it wants to lower borrowing rates. So, they start up the printing presses. They print enough "money" to buy bonds from the banks, thus putting the banks in a better cash position. When banks have more cash on hand than they need, they will lower rates to entice borrowing. It's a matter of supply and demand. Interest rates are a reflection of how much cash the banks have to lend. What's funny is that the Fed creates the money out of thin air ... a little paper and a little ink and "Poof"! Instant liquidity injection.

So, the question really is, "Did the Fed inject liquidity to lower the rate or to keep the banks solvent ... or maybe a bit of both"? The problem, as I see it, is that overall confidence in the US economy is abysmal. Even people with money aren't spending it. They're trying to stoke the lending fire but people aren't buying into it. Most people realize that the hard partying economy of the past decade is a big part of what's happening right now.

 

[cicio]

How come I didn't do any hard partying?? Cosidering that got us into the mess might as well have charged it up!

 

[mongo]

this is what you get in a faith based economy. Once the curtain is pulled back, and you see the man manipulating the controls, the entire illusion is destroyed.