Fed May Extend Support Past 2014, Official Says
Source: New York Times
Janet L. Yellen, the vice chairwoman of the Federal Reserve, said Wednesday that the lackluster trajectory of the economic recovery might require the Fed to continue its efforts to bolster growth even beyond the end of 2014.
In a speech in Manhattan, Ms. Yellen offered a rejoinder to recent remarks by other Fed officials and investors warning that the Fed would need to raise interest rates well before the end of 2014 to prevent an increase in the rate of inflation.
She indicated that the Feds leadership, including the chairman, Ben S. Bernanke, remained firmly committed to the central banks efforts to suppress interest rates and reduce the cost of borrowing for businesses and consumers.
I anticipate that the U.S. economy will continue to recover only gradually and that labor market slack will remain substantial for a number of years to come, Ms. Yellen said, according to an advance copy of her prepared remarks.
Read more: http://www.nytimes.com/2012/04/12/business/economy/fed-official-sees-long-road-back-for-economy.html
MannyGoldstein
(34,589 posts)Hmmm... and why isn't the economy getting better?
Very puzzling.
banned from Kos
(4,017 posts)up to $1.6 trillion now and the Fed pays a puny 1/4 of 1% to them.
So you have it backward.
The only loans the Fed makes to banks are emergency loans (2008-09)
MannyGoldstein
(34,589 posts)banned from Kos
(4,017 posts)at the Fed - currently $1.6 trillion. This is by law.
The Fed Funds rate is .010% - the rate the banks pay each other to access the pool when deposits drop. If deposits drop (a run) for a long time the bank goes insolvent (see Washington Mutual in 2008) and the bank is seized. The Fed knows the daily balance all the time because they run NACHA - the automated payments system.
WaMu had no collateral to access the loan window in 2008. It is still the second largest failure of any company in US history.
Simeon Salus
(1,144 posts)They practically hand money to banks/investment firms. Instead of loaning the money out for ridiculous profits in secured notes as banks, those banks give the money to their investment firms to loot the economy through private equity and derivative schemes. If they fail, we pay; if they win, they don't pay.
What could possibly go wrong?
Have they not ripped off enough faces?
Are they actually trying to destroy the economy intentionally? Or just until "serious" people are in charge?
The bank rate has been 0.25 for the entire Obama presidency. Where can homeowners get some of that 0.25% money?
banned from Kos
(4,017 posts)Deposit banks have $1.6 trillion parked at the Fed and it pays only 1/4 of 1% in interest. See above.
http://research.stlouisfed.org/fred2/series/WRESBAL
provis99
(13,062 posts)It should be relegated to the dustbin of economic theories like mercantilism and Austrian economics.
AdHocSolver
(2,561 posts)The Fed keeps interest rates low in its role of transferring middle class assets to Wall street and the banksters.
The U.S. economy is already experiencing considerable inflation, which is hidden by the way it is calculated and presented to the public.
Middle class bank depositors are being cheated by the banks on the money they earn on their deposits. The Fed effectively sets the interest paid to depositors.
When the banks charge 4 percent on a loan, and pay a paltry 0.1 percent interest on that money, they are realizing a 40 to 1 return on that money. When banks charge 14 percent interest on credit card balances on depositors' money that they pay 0.1 percent interest on, they are receiving 140 times return on depositors' money.
The Fed ensures the "legality" of this outright thievery, by ensuring that their is no competition in paying depositors fair value for the use of their money.
Throw in banking fees for bank transactions that used to be "free", and depositors wind up paying the banks for the "privilege" of "investing" their savings there.
Another reason for keeping interest rates low is to push middle class people to gamble their savings in the stock market. People see that they are getting so little interest on bank deposits that they come to believe that they have to do better in the stock market.
So they take their money out of insured accounts and buy stocks which can lose them their principal, and wind up competing with Wall Street that can manipulate stock prices by several methods not available to the small investor.
banned from Kos
(4,017 posts)some Ron Paul type has brainwashed you.
AdHocSolver
(2,561 posts)The Fed is a cartel of the banking industry that works solely to profit the banks and Wall Street.
Ron Paul may be off the wall on everything else, but he is spot on in his criticism of the Federal Reserve.
banned from Kos
(4,017 posts)Where banks issue their own notes (no Federal Reserve Notes like today).
Remember a central bank has duties including monetary policy, lender of last resort, payments, etc. Those would go away to the free market. Bank runs would be commonplace. Depositors would get hammered in recessions.
AdHocSolver
(2,561 posts)It would be nice if the Fed actually operated in the way it was promoted to the public, but this is not the case.
The Fed did not work to prevent the Great Depression of the 1930's, nor did it prevent the banking fraud and mismanagement of recent years.
This is because there is a conflict between serving the public interest and maximizing bank and corporate profits, and the Fed serves the banks and corporate interests.
fasttense
(17,301 posts)Psephos
(8,032 posts)CountAllVotes
(20,878 posts)If anything, it causes people to not spend as much, especially those that have been relying upon dividends from CDs and the like.
Operation Twist Your Arm until it falls off has not worked. The Fed was hoping to lure these same suspects into the stock market and most of them are not interested, hence the very low volumes being seen on Wall Street.
Rates need to be raised and then spending will commence. You don't need to study economics to figure this one out Ben. Nope.