What is Digg?362 Comments
- StingingNettle, on 12/16/2008, -12/+233This worked amazingly well for Japan over the last 2 decades. Oh wait no it didn't.
- tnerb067, on 12/16/2008, -8/+176Borrow money! Pay it back later! The more money we have, the more we can CONSUME! Consuming is good for America! Don't worry about paying the money back. You don't have to pay it back until LATER. Buy more, spend more, help America!*
*(note the cynicism and self loathing) - baphomet, on 12/17/2008, -15/+154The economy is so messed up by all the economic manipulation the Fed has done in the past decade that all of their tools are now failing. You can only poke and prod a nearly dead animal so long before it actually is totally and completely unable to respond to "stimulus".
Those who believe in the Federal Reserve believe in Keynesian economics which requires the "steady hand" of Government to take control of the ostensibly out of control, irrational markets. The thing is, Keynesianism has repeatedly failed in all of its applications, and it is not hard to see why. Asking the government to protect the value of money is like asking a thief to watch over your house when you are away. It doesn't make any sense, except of course to the Government, which loves Keynesianism because it requires the Government, and in turn Keynesianism is popular because there are a lot of jobs for those who subscribe to it.
In reality, each and every individual makes very rational, individual choices which in the aggregate determine the "market choice." However the results of these rational choices can only be the most economical if the assumptions of market conditions are valid, and the manipulation of interest rates by the Fed sends false signals about the state of the economy. This leads to malinvestment. It is proven impossible that one man or a set of men "at the top" can accurately predict what the market needs. The Fed sets its rates at what it thinks it should be, yet, how can that ever be correct? The true price of eggs, milk, etc., is determined by the market. Price controls only form shortages. The control over interest rates does the same thing, yet the results takes years to manifest, and instead of simply a shortage of eggs, we will have a shortage of "economy." In other words, the economy isn't economical in its current configuration. The malinvestment needs to be liquidated at market value, and restructured into economically viable systems of exchange.
Today we are seeing the manifestation of Fed policy from 5 years ago, and, just as a car traveling at 100 mph into a wall, there is very little that can be done to prevent the car from crashing. I fear that the current actions by the Fed and Congress will only exacerbate the issue. - judicar, on 12/17/2008, -8/+116Don't worry I'm sure the next 200 comments will present a thoughtful, informed analysis on how to solve the economic crisis and why lowering the interest rate is a bad idea.
- Dynamoo, on 12/16/2008, -6/+97Errrr.. what next? Negative interest rates?? The problem with actions like this is that they look like PANIC.. they hardly restore confidence, do they?
- Betrayal, on 12/17/2008, -43/+122END THE FED
- BlacklabelSAR, on 12/17/2008, -4/+71"This is the Captain of the Titanic. We've hit an iceberg and are taking water. But I think if we can just hit another iceberg we'll be ok."
- Zique, on 12/17/2008, -26/+90I SHOUT SLOGANS I'VE SEEN BEING DUGG UP WITHOUT ACTUALLY UNDERSTANDING THE ISSUES
- kemp34, on 12/16/2008, -8/+51The economics of these people is backwards.
- BJF9999, on 12/17/2008, -1/+39Hmm I think I will buy Marvin Gardens
- holzp, on 12/17/2008, -0/+31Next we start throwing shoes at the problem.
- kirakun, on 12/17/2008, -0/+31I'm waiting for the negative interest rates so that I get paid for borrowing money.
- jemka, on 12/17/2008, -7/+35REAGANOMICS!!!
- mitch37, on 12/17/2008, -2/+30Digg is the worlds biggest source of economic professors
- thegrantman, on 12/17/2008, -0/+28Who do you think you are?
Congress? - oboshoe, on 12/17/2008, -4/+31Once its at zero, they say "well *****, that didnt work, and we can't lower it anymore"
"oooo I know, Lets trying raising rates to see if that helps...cause we gotta do something"
And no. I'm really not joking. - rhustang, on 12/17/2008, -1/+26hmmm, wonder if i can re-consolidate my student loans?
- ElderBieler, on 12/17/2008, -9/+30End the Fed. Do something about it.
http://www.endthefed.us/ - anaesthetica, on 12/17/2008, -0/+19As long as the interest rate is lower than the inflation rate, you essentially *are* making money when you take out a loan.
- brandita, on 12/17/2008, -2/+20Saved by Zero!
- Paulish, on 12/17/2008, -6/+21This angers me so much. It takes away all incentive to save money. You need to spend it before inflation takes it's value. Years down the line there will be a ton of people without any savings demanding that the government fix their problems and it will all continue.
- inurb, on 12/17/2008, -10/+25Can you hear that? That's the sound of the dollar crashing.
- glhf, on 12/17/2008, -4/+17***** KFED!
- artfiend77, on 12/17/2008, -3/+16Speaking from third party experience here, I had a co-worker go down to Buffalo this weekend to do some shopping. She said she saw people in big malls, as far as the eye can see, shopping and spending lots of money. The hotel she stayed at was packed full of people ( Americans she says) and some stores even stayed open till midnight. She was totally puzzled and kept asking herself " What recession?"
- 3nder99, on 12/17/2008, -0/+13This has been going on a lot longer than the last 10 years.
- chris480, on 12/17/2008, -3/+15Low rates!! Buy buy buy!!
- inactive, on 12/16/2008, -5/+17"Whether it's zero or 0.25% actually does not make a huge difference," !
That must be the NEW fuzzy-math I hear tell about .
`
the dollar is falling against all major currencies," said Matt Esteve,.
Busshhed,,,,,,,,,,,,,,,,,,,,,,,,,,
sound's like things are going as planed: The banks will own everything! - Richandler, on 12/17/2008, -1/+12The whole world doesn't stop during a recession. Just the lowest people on the poll lose out.
- nail3r, on 12/17/2008, -2/+13Great post, I can see you put a lot of thought and effort into that. No idea why people are digging you down, because it made sense to an absolute beginner.
- Future2, on 12/17/2008, -0/+11Because banks borrow money to lend money, earning a spread on the transaction. The slogan used to be 3/6/3 banking: borrow at 3% lend at 6% be on the golf course by 3 o'clock. With interest rates the way they are now, that slogan might need to be modified. The bank I work at borrowers money from the FHLB of des moines (using loans as collateral). Here is a rate sheet they put out: http://www.fhlbdm.com/rates/rates.pdf.
How does it translate into savings for the average consumer? Several ways. The most obvious is most adjustable rates are pegged to the Wall Street Journal Prime (WSJP). Tomorrow prime will be lower because the Fed cut rates today. One year ago prime was 7.25%, believe it or not. Ideally the Fed's policy will lower the cost of funds for banks (generally measured by the LIBOR). If banks cost of funds are lower, they can afford to lend at lower rates. Market forces will drive down the rates for borrowers. This isn't always the case; however, the LIBOR has been falling the last few weeks.
I hope that clears up some of your questions. - thentro, on 12/17/2008, -1/+11It's a Liquidly trap!
- jojopumpkin, on 12/17/2008, -0/+10MasterCard, accepted everywhere canned patriotism and blind support for war is
- Tangeuray, on 12/17/2008, -0/+10I got Visa we support domestic wiretapping and torture.
- SuperCujo, on 12/17/2008, -0/+10The answer you seek is "Credit!"
- judicar, on 12/17/2008, -3/+12It's because the story was submitted to a slow category.
Stop being "that guy", thxbye. - morninglorii, on 12/17/2008, -0/+9This response is perfect. You're probably going to maintain about an even score on it, but people need to realize that taking Economics 101 doesn't mean they immediately understand all the intricacies of the current economy and how all problems should or shouldn't be solved.
- inactive, on 12/17/2008, -2/+11 I used to think diggers loved to post that until someone pointed out it's the same ass in every thread. As soon as I saw the comment I looked up and yep there he is the same troll!
Haha! - X9001, on 12/17/2008, -2/+11Second only to Youtube
- inactive, on 12/17/2008, -6/+14Am I the only one losing faith in Bernanke?
- ColonelJessup, on 12/17/2008, -11/+19Here we go again with the digg.com economic professors..........................
- 3nder99, on 12/17/2008, -0/+8You sure?
- locojones, on 12/17/2008, -0/+8It doesn't affect consumers at all. The interest rate being cut is simply the overnight bank lending rate, which is the rate banks charge one another for loaning each other money. So banks will get cheaper money, but you certainly won't.
- NJank, on 12/17/2008, -2/+10already done. but the problem was missed twice.
- reyalp, on 12/17/2008, -0/+7Lowering the interest rate does create new currency. Review the fundamentals of a reserve banking system.
- sheeplescareme, on 12/17/2008, -2/+9i've heard of that new math, too. billions are now trillions and massive deficits are positives, right?
- zacharytelschow, on 12/17/2008, -1/+81) Borrow from Fed at .25%
2) Lend to consumers at 4.5%
3) PROFIT!!!
Get it? - jwolcott, on 12/17/2008, -1/+8If this fails, game over. They can't go negative.
- Kent767, on 12/17/2008, -0/+7For almost any fixed rate loan, the banks don't lend money out at the fed's prime rate. It's always several percentage points higher.
ARMs will be most strongly affected, there will be some great rates on variable rate loans. (we know how that played out since the last huge rate cut in early 2000s, causing the recent subprime crisis)
HELOCs (Home equity line of credit) loans are sometimes lent out at values under prime, but they're for very lucky people with excellent credit, and alot of equity in their house. - Walled, on 12/17/2008, -0/+7Time to refinance the house mortgage.
- stradf, on 12/17/2008, -0/+6This is actualy a pretty good news, why are you all bitching?
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