Federal Reserve slashes interest rates to zero as part of wide-ranging emergency intervention

[TU Curmudgeon]

Goldman Sachs projecting Q1 GDP growth at 0% and Q2 at -5%.

That's great.

Mr. Trump promised 6% and 5 is pretty close to 6.

Right?

 

[Deuce]

That's great.

Mr. Trump promised 6% and 5 is pretty close to 6.

Right?

Just forgot the negative, that's a pretty easy mistake to make.

 

[GDViking]

Is America Great Again?

Great depression...

 

[GDViking]

Well cultists were excited about trump running the nation. Like his businesses.

He did, ha managed to bankrupt us and is going to walk away leaving the nation holding the bag...

 

[CaughtInThe]

Trump is a ****ing moron. He is incapable of leading and navigating America though this crisis. America will have a brighter future only when this ****ing idiot is gone.

He's always been an idiot.

But give him credit for copying what Rush Limbaugh and Sean Hannity say to get votes. It paid off big time.

 

[cpwill]

Yes, it could spark a run cash withdrawels - absolutely. That's the whole idea. It forces the public to withdraw their cash reserves to avoid the penalty.

It's never been done in America, and I can't imagine the crises of confidence it would set-off.

Precisely what I was thinking. Wanna See a Bank Run, kids?

Edit: Well, Dow futures are limit down, but not halted yet!

I wonder if we've reached the point where measures meant to reassure the market instead convince them the crises is bigger than they previously anticipated / has more steps to fall.

 

[Chomsky]

Precisely what I was thinking. Wanna See a Bank Run, kids?




I wonder if we've reached the point where measures meant to reassure the market instead convince them the crises is bigger than they previously anticipated / has more steps to fall.

I admit it seems to have counter-effect, every time during corona virus.

But you know, there is the adage,

"buy the rumour, sell the news"

 

[Chomsky]

Goldman Sachs projecting Q1 GDP growth at 0% and Q2 at -5%.

Marone! Man, that's recession time.

We have to hope the virus is a quick hit & go thing. The economy can handle a month or so, and quickly bounce back under the same fundamentals as previous to the downturn. But if the economy goes multiple months, like 3 or 4 or more, then you get the layoffs and actual economic infrastructure damage. That will require repairing, which doesn't happen overnight.

 

[JasperL]

Precisely what I was thinking. Wanna See a Bank Run, kids?

I wonder if we've reached the point where measures meant to reassure the market instead convince them the crises is bigger than they previously anticipated / has more steps to fall.

What seemed obvious is the Fed got some data over the weekend and had a genuine, "OH CRAP! We're FD!" moment.

But as I said on another thread, it hit home tonight how hard the new guidelines about social distancing are going to work. We kept a long-planned 35th anniversary dinner for some friends (which was a close call) and went to a restaurant in the heart of the entertainment district of downtown Knoxville. Lots of young people live downtown, and so Sunday is slower but busy on a beautiful Sunday night. It was a ghost town. There were a dozen parking places on the street - wherever you wanted. And the normally jammed restaurant had 4 tables occupied between 7pm - 9pm. Zero people at the bar. I'm guessing the two wait staff and bartender didn't clear $150 total between them, and we tipped at 30%. The entire area can't last a week, and all we can hope is the closings are just temporary.

 

[GDViking]

Marone! Man, that's recession time.

We have to hope the virus is a quick hit & go thing. The economy can handle a month or so, and quickly bounce back under the same fundamentals as previous to the downturn. But if the economy goes multiple months, like 3 or 4 or more, then you get the layoffs and actual economic infrastructure damage. That will require repairing, which doesn't happen overnight.

I don't believe even if the virus turns out to be just a minor speed bump it will matter all that much for the economic recovery.

We were running in an artificially inflated bubble just looking for a pin to pop it.

I just so happens it was this virus, if it hadn't been it would have been something else.

Trump set up the economy like bowling pins and it was just a matter of time before they were knocked down...

 

[Chomsky]

I don't believe even if the virus turns out to be just a minor speed bump it will matter all that much for the economic recovery.

We were running in an artificially inflated bubble just looking for a pin to pop it.

I just so happens it was this virus, if it hadn't been it would have been something else.

Trump set up the economy like bowling pins and it was just a matter of time before they were knocked down...

Yeah. In emotional terms - what is feels like - I very much agree; a correction felt like it was due. But the last three months of earnings & jobs was pretty damn solid, though!

 

[Chomsky]

All good points. Are you an economist?

I work in corporate accounting/finance. I read business news, but I am far from an expert on issues like these.

No, but thank you! :kissy:

My undergrad was in technology, but I minored in business - so I got to take Micro & Macro. I always loved economics (and finance), and even did a stint on a major trading floor for fun between tech jobs!

Yeah, what can I say? I find economics fascinating. But tech was in super-high demand & paid better straight-out of school, so there ya' go.

 

[Variant]

Excellent move.

Shores up market confidence and makes money cheap so the private sector and ride out the storm.

That will help top minimize panic over 401Ks and encourage investment.

Thanks to the Fed.

When the Fed did this the market futures automatically tripped the selloff circuit breaker.

 

[Chomsky]

A lot of the world is negative so this definitely discourages foreign investment in the US.

??

Negative rates elsewhere would discourage investing in the states? In what form? Equities? Or, interest bearing notes? Because negative interests elsewhere would seem to encourage investment in the States, at least in interest bearing investment vehicles.

 

[washunut]

No idea. I never imagined zero rates, much less negative. I have no frame of reference for this. I think it would force cash elsewhere, unless the rest of the world is negative also. It would have to kill the dollar, I would think. It could cast doubt on keeping the USD the world reserve currency. We're just not used to having no where safe for our money, including simply holding it.

Then you weren't around in 2008 when the Fed funds rate was at this level.

 

[Chomsky]

Then you weren't around in 2008 when the Fed funds rate was at this level.

Yeah, I remember it. But I was so busy with being bombarded with other things in my life, I didn't have much time to focus on it and pay attention. I seem to recall the overnight rate briefly went negative, if I remember correctly?

 

[washunut]

Yeah, I remember it. But I was so busy with being bombarded with other things in my life, I didn't have much time to focus on it and pay attention. I seem to recall the overnight rate briefly went negative, if I remember correctly?

I don't remember that. But I do seem to remember there was some concern with money market funds, which could have come from the blip you mentioned.

 

[Chomsky]

I don't remember that. But I do seem to remember there was some concern with money market funds, which could have come from the blip you mentioned.

Yeah, I seem to recall it was an intra-day blip. But don't quote me on that.

 

[Mongidig]

I have been reading business news, and it sounds like Trump appointed Jerome Powell, a Trump loyalist. Then Trump encouraged him to keep interest rates low. Trump loved low interest rates and deep corporate tax cuts, because it caused the markets to soar. The bad thing, is it also created high deficits and long term low interest rates, and that's very bad when facing a possible recession and depression. Trump should have restructured the economy. Once it was rescued from the previous recession, it need to be restructured. Instead, Trump kicked the engine into overdrive and risks blowing up the whole engine. Everything I have read says another recession under these macroeconomic conditions is going to be a lot worse than the 2008 recession and financial crisis.

Trump is also thinking about firing Powell, which would also cause markets to panic. Trump needs a fall guy though.

He should fire him and replace him with Jarrod Kushner!

 

[washunut]

I have been reading business news, and it sounds like Trump appointed Jerome Powell, a Trump loyalist. Then Trump encouraged him to keep interest rates low. Trump loved low interest rates and deep corporate tax cuts, because it caused the markets to soar. The bad thing, is it also created high deficits and long term low interest rates, and that's very bad when facing a possible recession and depression. Trump should have restructured the economy. Once it was rescued from the previous recession, it need to be restructured. Instead, Trump kicked the engine into overdrive and risks blowing up the whole engine. Everything I have read says another recession under these macroeconomic conditions is going to be a lot worse than the 2008 recession and financial crisis.

Trump is also thinking about firing Powell, which would also cause markets to panic. Trump needs a fall guy though.

Reading this post I find it hard you are in the accounting field. You may recall that the Fed under Powell at first RAISED rates much to Trump chagrin. I would like to see any articles that state that Powell is a Trump loyalist, his actions have proven this to be untrue.

I do agree that the virus and the actions to tamp it down will severely hurt the economy. The pain will be greater than 2008, as that was the bursting of a bubble in one sector,housing.

While it is fair to say that Trump mishandled testing etc, not sure how you could blame him for this virus which is shutting down much of America.

 

[Drawdown]

??

Negative rates elsewhere would discourage investing in the states? In what form? Equities? Or, interest bearing notes? Because negative interests elsewhere would seem to encourage investment in the States, at least in interest bearing investment vehicles.

Negative rates here would discourage investing in US bonds, something about $5T of our national debt is financed through (foreign investment). Saudi Arabia parks a lot of cash into us treasuries (and I have seen speculation they park a lot more than is stated through various shell companies).

If say you were going to lose money for the next ten years on a bond, you would be better off putting the money into stocks.

 

[EnigmaO01]

Just like when Reagan made it great!

I credit Reagan for getting the ball rolling on hateful partisanship that has split this country.

 

[EnigmaO01]

What an inane comment. I could care less if Trump or anyone else is president right now. We were talking about Fed policy and you turn to political hackery trash. Shows you could care less about fellow citizens and only about your "side".

Learn about a topic you want to debate is a suggestion which might be helpful. Perhaps less attempting to bait or flame the debate would also be helpful IMHO.

You could care less? Are you sure? You don't think the president has anything whatsoever to do with confidence and lack there of of our financial system and markets even if technically "The Fed" is supposed to be an unpolitical entity and not influenced by the president?

 

[EnigmaO01]

That's great.

Mr. Trump promised 6% and 5 is pretty close to 6.

Right?

Sure the numeral value is the same but if one looks at the Y axis of positive vs. negative numbers... :lamo

 

[EnigmaO01]

Just forgot the negative, that's a pretty easy mistake to make.

:lamo