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Fed sees "downside risks" to economy have increased, OKs 1/2 point cut in discount rate to banks.
http://www.cnn.com/ ^ | 8-16-07

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 ...


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To: nj_pilot
And you are not so naive as to be blind to the *huge* change in value if all of a sudden an asset you were unable to finance can now be financed. sheesh.

I see, stopping a selling panic is exactly like welfare for the wealthy. LOL!

101 posted on 08/17/2007 5:11:39 PM PDT by Toddsterpatriot (Ignorance of the laws of economics is no excuse.)
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To: Toddsterpatriot

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!
_________________________________________________________

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 . . .


102 posted on 08/17/2007 5:23:43 PM PDT by Greg F (The Congress voted and it didn't count and . . . then . . . it didn't happen at all.)
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To: Toddsterpatriot
I see, stopping a selling panic is exactly like welfare for the wealthy. LOL! weak. sorry.. i missed the larry kudlow crony capitalism meeting last week. Countrywide should be allowed to fail, as should any lender that made bad choices. What part of moral hazard don't you understand, and isn't that what got us here?
103 posted on 08/17/2007 5:35:00 PM PDT by nj_pilot
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To: Greg F
The effect would be 270 billion added to the deficit, with 9 trillion dollars in debt to pay interest on.

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%?

104 posted on 08/17/2007 5:36:00 PM PDT by Toddsterpatriot (Ignorance of the laws of economics is no excuse.)
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To: nj_pilot
Countrywide should be allowed to fail, as should any lender that made bad choices.

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?

105 posted on 08/17/2007 5:40:02 PM PDT by Toddsterpatriot (Ignorance of the laws of economics is no excuse.)
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To: Toddsterpatriot

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.


106 posted on 08/17/2007 5:48:24 PM PDT by Greg F (The Congress voted and it didn't count and . . . then . . . it didn't happen at all.)
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To: Greg F
50 to 60 trillion in unfunded obligations. Run that at 4.7% . . .

Why would you do that?

107 posted on 08/17/2007 5:53:28 PM PDT by Toddsterpatriot (Ignorance of the laws of economics is no excuse.)
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To: Toddsterpatriot

Look at what the GAO has to say.

http://www.gao.gov/new.items/d061077r.pdf


108 posted on 08/17/2007 5:58:00 PM PDT by Greg F (The Congress voted and it didn't count and . . . then . . . it didn't happen at all.)
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To: Greg F

Scary! So what?


109 posted on 08/17/2007 5:59:59 PM PDT by Toddsterpatriot (Ignorance of the laws of economics is no excuse.)
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To: Toddsterpatriot

Did you read it? Earlier you “LOL” at the idea that our debt was a problem. Still laughing?


110 posted on 08/17/2007 6:01:23 PM PDT by Greg F (The Congress voted and it didn't count and . . . then . . . it didn't happen at all.)
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To: Toddsterpatriot
they are transferring value there, as noted above. you can't get away from that. that is a bailout - however fleeting it may be. enough of this... we disagree and that's ok...

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.

111 posted on 08/17/2007 6:01:26 PM PDT by nj_pilot
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To: Hydroshock

looks like the market likes it.


112 posted on 08/17/2007 6:03:00 PM PDT by Wheee The People (Go FRed)
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To: Greg F
Did you read 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%.

113 posted on 08/17/2007 6:05:52 PM PDT by Toddsterpatriot (Ignorance of the laws of economics is no excuse.)
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To: nj_pilot
Maybe the fed addressed a short-term liquidity shortage,

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?

114 posted on 08/17/2007 6:09:59 PM PDT by Toddsterpatriot (Ignorance of the laws of economics is no excuse.)
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To: Toddsterpatriot
*separate issue*
115 posted on 08/17/2007 6:10:34 PM PDT by Toddsterpatriot (Ignorance of the laws of economics is no excuse.)
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To: Toddsterpatriot
How do these 30 day loans lose money for savers or taxpayers? if you can't see that low interest rates are harmful to savers, then I just don't know where to start. Your premise is that these are 30 day loans. not so. they are an vast expansion of eligible collateral on much easier and longer terms than the discount window has ever been used for. But I will never convince you, nor you me, so i'll just leave it at that. You may have the last word if you wish, but this is really pointless.
116 posted on 08/17/2007 6:27:56 PM PDT by nj_pilot
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To: nj_pilot
if you can't see that low interest rates are harmful to savers,

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.

117 posted on 08/17/2007 6:35:54 PM PDT by Toddsterpatriot (Ignorance of the laws of economics is no excuse.)
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To: Toddsterpatriot

You realize our debt is a separte issue from Social Security and Medicare?
________________________________________________

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.
_______________________________________________

The market knows these things and still our 10 year bond yields less than 5%.
________________________________________________

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.


118 posted on 08/18/2007 6:48:06 AM PDT by Greg F (The Congress voted and it didn't count and . . . then . . . it didn't happen at all.)
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To: Hydroshock
This is not going to solve anything.

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? :-}

119 posted on 08/18/2007 6:50:18 AM PDT by unixfox (The 13th Amendment Abolished Slavery, The 16th Amendment Reinstated It !)
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To: Greg F
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.

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.

120 posted on 08/18/2007 7:20:33 AM PDT by Toddsterpatriot (Ignorance of the laws of economics is no excuse.)
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