Posted on 08/17/2007 5:22:20 AM PDT by Hydroshock
Fed declares "downside risks" to economy have increased, OKs half percentage point cut in discount rate on loans to banks. (Breaking
(Excerpt) Read more at cnn.com ...
I see, stopping a selling panic is exactly like welfare for the wealthy. LOL!
Will the 10 year rate rise above today’s 4.67% rate? Sure. Will it rise to 6%? Maybe. Would 6% kill our economy? Would 7%? 8%? LOL!
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Take the highest rate you stated 8%. I remember when the interest rates were 13% on Treasuries. . . but we’ll take 8%. 3.5% higher than today. The effect would be 270 billion added to the deficit, with 9 trillion dollars in debt to pay interest on. Even you must see that isn’t a laughing matter. Throw in the GSA studies that say our current spending is already unsustainable given future promises of spending in entitlements . . .
Debt held by the public is $5 trillion, call it $175 billion more. Less than 1.5% of GDP.
Now when was the last time the 10 year paid 8%?
I agree. Now when you finally figure out that they still own their bad loans, despite any short term loan they get from the Fed, you'll see that they might still fail.
What part of moral hazard don't you understand, and isn't that what got us here?
Since the Fed is not giving them money, what part of "a loan is different than a purchase" don't you understand?
Seems kind of funny to ignore the Social Security funds when the existing ones are only the tip of the iceberg. 50 to 60 trillion in unfunded obligations. Run that at 4.7% . . .
Interest rates won’t be there for long though with that level of required spending by government.
Why would you do that?
Scary! So what?
Did you read it? Earlier you “LOL” at the idea that our debt was a problem. Still laughing?
If you are right and there was a real threat to the payments system recently, then we are all screwed, because what's happened so far in the unwind of this CDS/CDO/CMO leveraged unwind in trivial. Maybe the fed addressed a short-term liquidity shortage, but the real issue is and remains looming insolvency. I really hope that there was no threat to the payment system, because helicopter ben is going to have his work cut out for him.
looks like the market likes it.
I skimmed it.
Earlier you “LOL” at the idea that our debt was a problem.
You realize our debt is a separte issue from Social Security and Medicare?
Still laughing?
Yes. The market knows these things and still our 10 year bond yields less than 5%.
Excellent!
but the real issue is and remains looming insolvency.
Insolvency? How large do you think these CDO losses will be?
What about your original remark "no loss there, except to savers and taxpayers"? How do these 30 day loans lose money for savers or taxpayers?
The discount rate of 5.75% harms savers? How?
Your premise is that these are 30 day loans. not so.
How long are the loans for?
they are an vast expansion of eligible collateral on much easier and longer terms than the discount window has ever been used for.
Yes, 30 days.
But I will never convince you
That these loans cost savers or taxpayers money? You may convince me, I'm still waiting for your evidence.
You realize our debt is a separte issue from Social Security and Medicare?
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No, it is not. Social Security, Medicaire, Medicaid, Prescription Drug Benefits, and hundreds of smaller programs costs will continue to increase and drive up taxes and/or force monetization of the debt. Both situations are not good for investing.
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The market knows these things and still our 10 year bond yields less than 5%.
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You seem to be under the impression that markets perfectly price securities. But if this were so then markets wouldn’t crash, securities wouldn’t fall dramatically, and returns on investments would be less divergent.
Just like most of the over bloated government crap they pull. It's only made to "appear" to solve something. It's designed to make you "feel" better.
Didn't you get the memo? :-}
Congress could pass a bill tomorrow that cuts SS benefits in half. So it is much different than our debt. And why did you say "50 to 60 trillion in unfunded obligations. Run that at 4.7% . . ."? You think our unfunded obligation grows at 4.7% each year?
That deficit is over the next 75 years? What will our GDP over the next 75 years be? If they privatize half of SS, don't you think that would cut the shortfall in half?
You seem to be under the impression that markets perfectly price securities.
You seem to be under the impression that the market is unaware of the shortfall.
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