Posted on 01/03/2009 5:47:24 PM PST by NormsRevenge
SAN FRANCISCO (Reuters) – A grim economic outlook highlights the need for the Federal Reserve to step up quantitative measures to boost growth, with official interest rates already effectively at zero, Charles Evans, president of the Chicago Fed, said on Saturday.
Evans said that based on the outlook for rising unemployment, falling industrial production and a wider output gap, economic models suggest rates should be below zero.
"If it were not constrained by zero, those models would want to push it below zero, but that's not possible," Evans told reporters after a panel at the American Economic Association's meeting in San Francisco.
Quantitative easing, a way to flood the banking system with large amounts of money, "is a way to mimic below-zero rates and provide support to the economy," he said.
The process often involves buying up large quantities of assets from banks, such as the Fed's latest programs to buy mortgage-backed securities.
In December, the Federal Open Market Committee, the Fed's policy-setting body, took the surprising step of lowering the federal funds rate to a range of zero to 0.25 percent. Cash fed funds had been trading below the previous 1 percent target rate for several weeks.
In his remarks, Evans, who is a voting member of the FOMC in 2009, said the Fed's various lending programs should help cushion the impact of the year-old U.S. recession but a large traditional fiscal stimulus plan is also needed, even with the problems it could create over the longer term.
"I believe a big stimulus is appropriate," Evans said. ...
Without the Fed's programs to help unfreeze credit markets and to-the-bone rate cuts, "the downturn -- and its costs to society -- would be even more severe than what we are currently facing," said Evans.
(Excerpt) Read more at news.yahoo.com ...
You don’t need to lower interest rates to increase liquidity. What they need to do is buy some nonliquid assets—CMBS, real estate, or even cars.
By all means, lets start another housing ponzi scheme based on bad loans and teaser interest rates. What’s the worst that could happen?
Notice how none of these Democrats ever mention freedom, liberty or the free market. I wonder why.
Yes, the S&L crisis was caused by the very same Democrat actors, trying to do the very same thing, allow people who did not have the means buy houses.
The hyperinflation solution.
Of course it possible. Just PAY people to take at zero interest loans. After all, its only FOREIGN money anyway. Where do I sign up?
These idiots really are throwing dead cats at the moon. They haven’t the slightest idea what they’re doing.
Let's name names, I'll start, Chris Dodd, Barney Frank.....
I’ve heard there is an excess of one millions houses in the market.
What we need to do is burn them all down, then that will create a new market for houses. Hey, it works for agriculture doesn’t it? /s
Bastiat must be having a good laugh.
AND pay you to take it!
THAT's what "below zero interest rates" means:
PAYING people to take free money!
Special Agro-Cheque 50 Billion.. ?
That’s chump change for Congre$$ ;-)
Jimmy Carter ...
These, my friend, are not "petty" thieves, but thieves on a grand scale!
And this is called "grand larceny."
This was in effect the argument made in an editorial in the Wall Street Journal a couple months ago.
That the gvernment should buy the houses, then burn them down.
Seriously.
All well and good, but if the general population does not recover confidence a flood of money will have no effect if it does not move. Suddenly we have a savings rate of 2 % - up from zero - because people are worried. (There is even a growing market for piggy banks.)
What we seem to be facing is a crossroads leading either to stag-inflation or stag-deflation, and either way the stag part does not inspire confidence.
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