Because it could be the straw that broke the Chinese's back into making a deal.
Why lower interest rates now?
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Last: 4 yr ago by Self-Made
Please explain. I don't understand why the Fed funds rate going down 25 or 50 basis points is going to force China into making a deal.IrishTxAggie said:
Because it could be the straw that broke the Chinese's back into making a deal.
The theory is it would help with the offset of the tariffs further putting pressure on the Chinese gov't to make a deal because the fed would give us the room to whether the storm
You really think lowering interest rates slightly from these already extreme lows is going to stimulate the economy? Something, something, pushing a string...IrishTxAggie said:
The theory is it would help with the offset of the tariffs further putting pressure on the Chinese gov't to make a deal because the fed would give us the room to whether the storm
You really think not doing will help with getting China to a reasonable deal? I think it would offer enough stimulation in the short term to continue to apply pressure on the Chinese. I'm not saying you continuously drop it to near zero like before, but if you offer enough for us to counteract the tariff effect, China loses a huge piece of leverage. I'm hoping it doesn't come to another fed cut and the Chinese deal soon, but if they don't absolutely do it.Woody2006 said:You really think lowering interest rates slightly from these already extreme lows is going to stimulate the economy? Something, something, pushing a string...IrishTxAggie said:
The theory is it would help with the offset of the tariffs further putting pressure on the Chinese gov't to make a deal because the fed would give us the room to whether the storm
I honestly don't think the Fed cutting rates would help a Chinese deal happen. It would make us look weak and as though the Fed is reversing course.IrishTxAggie said:You really think not doing will help with getting China to a reasonable deal? I think it would offer enough stimulation in the short term to continue to apply pressure on the Chinese. I'm not saying you continuously drop it to near zero like before, but if you offer enough for us to counteract the tariff effect, China loses a huge piece of leverage. I'm hoping it doesn't come to another fed cut and the Chinese deal soon, but if they don't absolutely do it.Woody2006 said:You really think lowering interest rates slightly from these already extreme lows is going to stimulate the economy? Something, something, pushing a string...IrishTxAggie said:
The theory is it would help with the offset of the tariffs further putting pressure on the Chinese gov't to make a deal because the fed would give us the room to whether the storm
New campaign slogan - "Make the dollar worthless again"?SoupNazi2001 said:Woody2006 said:I honestly don't think the Fed cutting rates would help a Chinese deal happen. It would make us look weak and as though the Fed is reversing course.IrishTxAggie said:You really think not doing will help with getting China to a reasonable deal? I think it would offer enough stimulation in the short term to continue to apply pressure on the Chinese. I'm not saying you continuously drop it to near zero like before, but if you offer enough for us to counteract the tariff effect, China loses a huge piece of leverage. I'm hoping it doesn't come to another fed cut and the Chinese deal soon, but if they don't absolutely do it.Woody2006 said:You really think lowering interest rates slightly from these already extreme lows is going to stimulate the economy? Something, something, pushing a string...IrishTxAggie said:
The theory is it would help with the offset of the tariffs further putting pressure on the Chinese gov't to make a deal because the fed would give us the room to whether the storm
Completely agree, Fed rate cut does nothing in this regard. I voted for Trump, but his constant badgering of the Fed make him look like an idiot when you look at what he was saying about the Fed during the election. Hint the stock market was a massive bubble and interest rates were way too low. Market is within 1% of an all time high and we are talking about rate cuts from an already incredibly low Fed Funds rate.
Hold or raise
In theory, doesn't lowering interest rates increase the money supply thereby weakening the dollar? The dollar has been very strong recently. I also recall that Trump wants to push American exports... which a strong dollar would hinder.
SoupNazi2001 said:Woody2006 said:I honestly don't think the Fed cutting rates would help a Chinese deal happen. It would make us look weak and as though the Fed is reversing course.IrishTxAggie said:You really think not doing will help with getting China to a reasonable deal? I think it would offer enough stimulation in the short term to continue to apply pressure on the Chinese. I'm not saying you continuously drop it to near zero like before, but if you offer enough for us to counteract the tariff effect, China loses a huge piece of leverage. I'm hoping it doesn't come to another fed cut and the Chinese deal soon, but if they don't absolutely do it.Woody2006 said:You really think lowering interest rates slightly from these already extreme lows is going to stimulate the economy? Something, something, pushing a string...IrishTxAggie said:
The theory is it would help with the offset of the tariffs further putting pressure on the Chinese gov't to make a deal because the fed would give us the room to whether the storm
Completely agree, Fed rate cut does nothing in this regard. I voted for Trump, but his constant badgering of the Fed make him look like an idiot when you look at what he was saying about the Fed during the election. Hint the stock market was a massive bubble and interest rates were way too low. Market is within 1% of an all time high and we are talking about rate cuts from an already incredibly low Fed Funds rate.
Would leave us with a lot less dry powder in the event of an economic downturn too. The next downturn is coming sooner or later, and if rates are near zero when it happens we'll be up a creek.
There are a lot of concerns in the financial world about global fragility.
Some economic health indicators aren't looking too hot. China's house of cards could be falling. The US hasn't experienced a recession in a statistically long time. There is still plenty of risk in the EU.
Geopolitical risk is high: Venezuela imploding. A proxy war between Saudi Arabia and Iran, with both countries experiencing internal turmoil and committing violent crimes against neutral parties. Putin's Russia invades someone every few years.
All the prospective overhangs people worry about are still out there: student loans, social security, unfunded liabilities, the deficit and skyrocketing debt, healthcare costs, and an increasingly polarized political landscape. Social tech raising concerns over monopoly and speech. A dramatically shifting energy landscape. The immigration situation. Global warming, because regardless of [insert all facets of the argument here], many people are terrified of it. Real estate prices are back to pre-crash levels.
We are walking a tightrope right now.
Some economic health indicators aren't looking too hot. China's house of cards could be falling. The US hasn't experienced a recession in a statistically long time. There is still plenty of risk in the EU.
Geopolitical risk is high: Venezuela imploding. A proxy war between Saudi Arabia and Iran, with both countries experiencing internal turmoil and committing violent crimes against neutral parties. Putin's Russia invades someone every few years.
All the prospective overhangs people worry about are still out there: student loans, social security, unfunded liabilities, the deficit and skyrocketing debt, healthcare costs, and an increasingly polarized political landscape. Social tech raising concerns over monopoly and speech. A dramatically shifting energy landscape. The immigration situation. Global warming, because regardless of [insert all facets of the argument here], many people are terrified of it. Real estate prices are back to pre-crash levels.
We are walking a tightrope right now.
The national debt has become so big that we cannot raise rates very much and continue to service that debt, maintain our military, and fund the massive social programs our politicians promise the masses.
Low rates allow us to walk that tightrope, but if they rise something has to give.
Low rates allow us to walk that tightrope, but if they rise something has to give.
I voted for Trump, too. But, not sure I will again even if it means not voting. His badgering the Fed is only an attempt to devalue the dollar. He has basically come out and said this. I can't support a president who's goal is to make us live off a peso. Most people are too stupid to realize what he is doing - making them poorer for the perception of a "boom" economy. Yikes. We are living in a crazy time here.Quote:
New campaign slogan - "Make the dollar worthless again"?
It is all comparative. And is there a developed, western country with higher Central Bank rates than the US currently has?
The Swiss, Sweden, and Japan all have negative interest rates. The European Central Bank has 0.0% rate. Great Britain, Australia, and Israel are at 1% or lower. Canada and South Korea are at 1.75%. The US currently sits at 2.5%. The only countries with higher rates are developing BRIC countries - Brazil, Russia, India, and China.
The Swiss, Sweden, and Japan all have negative interest rates. The European Central Bank has 0.0% rate. Great Britain, Australia, and Israel are at 1% or lower. Canada and South Korea are at 1.75%. The US currently sits at 2.5%. The only countries with higher rates are developing BRIC countries - Brazil, Russia, India, and China.
Gap said:
It is all comparative. And is there a developed, western country with higher Central Bank rates than the US currently has?
The Swiss, Sweden, and Japan all have negative interest rates. The European Central Bank has 0.0% rate. Great Britain, Australia, and Israel are at 1% or lower. Canada and South Korea are at 1.75%. The US currently sits at 2.5%. The only countries with higher rates are developing BRIC countries - Brazil, Russia, India, and China.
That's the way Obama saw it. Were you a fan of his economic policies?
Obama had historically low rates in our country and needed part time job gains to muster ANY growth. Trump cut back his regulations, lowered taxes, and began to get the engine started again. Trump isn't against raising interest rates. He was against the suspicious timing of them RIGHT before the mid terms.. and guess what.. they stopped raising them after the mid terms. I believe Trump wants the economy to keep moving forward and to get to a place where its stable (hopefully with a resolution on China) before raising the rates too aggressively.John Francis Donaghy said:Gap said:
It is all comparative. And is there a developed, western country with higher Central Bank rates than the US currently has?
The Swiss, Sweden, and Japan all have negative interest rates. The European Central Bank has 0.0% rate. Great Britain, Australia, and Israel are at 1% or lower. Canada and South Korea are at 1.75%. The US currently sits at 2.5%. The only countries with higher rates are developing BRIC countries - Brazil, Russia, India, and China.
That's the way Obama saw it. Were you a fan of his economic policies?
And to the guy who might not vote for him because of his stance on rates.. if you're willing to sit out for the most economically friendly president since Reagan, then don't whine when a Dem wins and this country goes to complete **** with taxation, confiscation of 401k's and IRA's, wealth redistribution, rising unemployment, and massive inflation.
Trump has a book that literally details his gameplan with every project he undertakes, has played it out over and over again, and still some of you can't see the forest through the trees.
The trade war moves have certainly not been friendly to my business. I have spent more time researching how to move global supply chains around and fixing pricing structures (raising prices on consumers) to plug my profit hole than I have growing core demand. Whether or not Trump's trade war is good policy is a conversation for the politics board, but it has unarguably lowered my company's profit and been a huge distraction from business as usual.
Rates got raised too fast at the end of 2018. Should have gone a bit more gradual. But now that we are, cutting is insane but looks like its gonna happen.
Trump "began to get the engine started again." What metrics can we use to measure that?
AustinTownHallAg said:
Trump "began to get the engine started again." What metrics can we use to measure that?
Lowering taxes, cutting ant business and heavy handed environment regulations, getting us out of the money pit that was the Paris climate Accords, job growth up, unemployment down, America a net exporter of oil for first time ever, GDP magically higher, etc, etc.
I must have forgot, Obama did all of those things and is the real reason our economy is better than it's been in decades.
Probably the most important thing Trump has done is to continue kicking the can of debt down the road. Not hard to grow GDP when money is free and the xerox machines are well oiled.
Shouldn't you be directing your anger at Congress? Sure, Trump could take a hard stance on cutting spending, but he has cut more fat from bureaucratic purses than any president in my life time. Do you even know who controls spending and what the breakdown is? Most is military and bloated government benefits.94chem said:
Probably the most important thing Trump has done is to continue kicking the can of debt down the road. Not hard to grow GDP when money is free and the xerox machines are well oiled.
The Federal Reserve is constantly playing with interest rates to see where they can find a level to keep the federal funds rate at. I agree with others in that they raised it a bit too quick last year however they just wanted to push the envelope to see how far they could go. I think they are cutting rates now because Powell might be caving into pressure or they have economic data which supports the thought that they've reached the maximum level.
Not trying to be rude. You made a list of things with no data to support it. Corporate taxes went down, but many large corporations are using any savings for share buy backs to inflate share prices. That's good for me personally, but doesn't add value to the economy. I also think the "slashing of regulations" is pretty vague and definitely not the case at the local level.
Any evidence to back that up?AustinTownHallAg said:
Not trying to be rude. You made a list of things with no data to support it. Corporate taxes went down, but many large corporations are using any savings for share buy backs to inflate share prices. That's good for me personally, but doesn't add value to the economy. I also think the "slashing of regulations" is pretty vague and definitely not the case at the local level.
More money in the pockets of people who employ and innovate is more funds available for investment. Simple econ 101 type stuff.
It's almost as if you are arguing that the economy was always going to do this.. almost like a magic wand was waved.
And I'm supposed to show you supporting data for all of Trump's policies that have been economically and business friendly which has helped push GDP and spurn the economy, yet you don't think tax cuts had anything to do with it.
No thanks.
One could argue that you can't even say Trump has improved or hurt the GDP growth as it's hard to measure an impact on that scale over time.
Bonfire97 said:I voted for Trump, too. But, not sure I will again even if it means not voting. His badgering the Fed is only an attempt to devalue the dollar. He has basically come out and said this. I can't support a president who's goal is to make us live off a peso. Most people are too stupid to realize what he is doing - making them poorer for the perception of a "boom" economy. Yikes. We are living in a crazy time here.Quote:
New campaign slogan - "Make the dollar worthless again"?
Then you run the risk of having a president who is going to give all of your pesos to someone else.
We live in a world of 2 sh*tty options.
Yep. I completely agree with you. I think people who have saved their money and have been responsible their whole lives are hosed - one way or the other.Quote:
Then you run the risk of having a president who is going to give all of your pesos to someone else.
We live in a world of 2 sh*tty options.
I really don't want to turn this thread into an argument, but I haven't seen any type of data to suggest that "more money = more investments". In fact the limited studies I have seen say the exact opposite. Top execs/companies/business people tend to hang onto the extra money and not spend it. It would make logical sense like you said that they would reinvest, but it turns out most people are just greedy *******s.mazag08 said:Any evidence to back that up?AustinTownHallAg said:
Not trying to be rude. You made a list of things with no data to support it. Corporate taxes went down, but many large corporations are using any savings for share buy backs to inflate share prices. That's good for me personally, but doesn't add value to the economy. I also think the "slashing of regulations" is pretty vague and definitely not the case at the local level.
More money in the pockets of people who employ and innovate is more funds available for investment. Simple econ 101 type stuff.
Bonfire97 said:Yep. I completely agree with you. I think people who have saved their money and have been responsible their whole lives are hosed - one way or the other.Quote:
Then you run the risk of having a president who is going to give all of your pesos to someone else.
We live in a world of 2 sh*tty options.
You have to buy physical assets. Forever postage stamps might be a good inflation hedge.
I'd like to see the data you are referring to if you don't mind.Ranger222 said:I really don't want to turn this thread into an argument, but I haven't seen any type of data to suggest that "more money = more investments". In fact the limited studies I have seen say the exact opposite. Top execs/companies/business people tend to hang onto the extra money and not spend it. It would make logical sense like you said that they would reinvest, but it turns out most people are just greedy *******s.mazag08 said:Any evidence to back that up?AustinTownHallAg said:
Not trying to be rude. You made a list of things with no data to support it. Corporate taxes went down, but many large corporations are using any savings for share buy backs to inflate share prices. That's good for me personally, but doesn't add value to the economy. I also think the "slashing of regulations" is pretty vague and definitely not the case at the local level.
More money in the pockets of people who employ and innovate is more funds available for investment. Simple econ 101 type stuff.
I work in commercial real estate on the investment side. I've seen first hand what's happened in the last couple pf years related to amount of funds seeking investments. But it's not just real estate.
Venture Capital beat the year 2000 all time high in 2018.
https://pitchbook.com/media/press-releases/us-venture-capital-investment-reached-1309-billion-in-2018-surpassing-dot-com-era
https://www.wsj.com/articles/real-estate-funds-have-a-problem-too-much-cash-11553607001
Quote:
Private real-estate fund managers, sitting on record amounts of cash, are finding it increasingly difficult to spend all that money within the deadlines they promised investors.
Funds with fixed lifespans generally promise investors they will spend the money they commit within three to five years. But as of last June, closed-end real-estate vehicles launched in 2013 and 2014 still held $24.8 billion in dry powder, capital committed by investors that has yet to be spent, according to research and data firm Preqin Ltd.
The problem is likely to get worse. The total amount of dry powder held by closed-end private property funds increased to a record $333 billion this month, up from $134 billion at the end of 2012, according to Preqin.
The idea that people are sitting on too much cash is such a nonsensical idea. There is a certain amount of cash in the system. If the people sitting on cash deploy it, then there will just be other people sitting on cash.