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Fed ready to slash rates amid deepening recession

December 16th, 2008 . by TexasFred

Fed ready to slash rates amid deepening recession

WASHINGTON (AP) - With the recession dragging down consumer prices and home construction, the Federal Reserve is prepared to slash a key interest rate - perhaps to an all-time low - in a desperate bid to stem the country’s economic slide.

Consumer prices fell by a record amount in November, while home building plunged by the most in a quarter-century, according to government reports released Tuesday that underscored the economy’s weakening state.

Falling prices for goods and services at first blush might sound like a good thing. But if prices keep spiraling downward, they can wreak economic havoc. That gives the Fed another reason to lower rates, which would protect against this risk.

With the Fed’s key rate dropping ever closer to zero, the central bank is moving into uncharted territory.

Nonetheless, Fed Chairman Ben Bernanke has made it clear the Fed isn’t running out of ammunition to fight the worst financial crisis since the 1930s. It is exploring using tools - other than rate cuts - to revive the economy. New insights on that front could be revealed when Bernanke and his colleagues wrap up a two-day meeting Tuesday.

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Fed ready to slash rates amid deepening recession

I have said many times, I am NOT a finance guy, I have a finance guy that takes care of our business for us, so, take this as an opinion piece only.

The FED is cutting rates again, and saying it’s going to help *jump start* the economy. Well, maybe so, but it hasn’t done it so far. The *stimulus* checks were supposed to *jump start* the economy. Nope, didn’t happen, in fact, it got worse.

The stock market is shaky at best, up one day and down the next. Wall Street has lost well over 5K points in recent days. I felt that the stock market was seriously over inflated anyway, I have felt that there had to be a correction in market levels. And there was.

This morning the markets opened UP, as I am writing this they are floating in the + 80/90 range, but if recent actions are any indication, the market could close up by a few hundred or down by just as much. Any hiccup in the market can drive it crazy, one way or the other.

Once upon a time there were many people heavily invested in CDs, certificates of deposit for you younger folks that may not know what an original CD was. Today, as of right now, the return on CDs is ridiculous. A 6 month CD is coming in at 2.75%, a 1 year CD at 3.20%, a 5 year CD is bringing in 3.62%, a bit better yes, but your money is tied up for 5 years. IRA CDs aren’t any better, a 1 year is at 2.89% and a 5 year is at 3.26%. All of those figures are current as of today and are down from last week. Figures were taken from Bankrate.com

I have no idea what to do. I am not alone either. Many of us, hell, ALL of us are in a quandary, especially retirees. We are on fixed incomes and rely on investments to take up the slack in our incomes. That money is just not there now. I am seriously concerned, I am wondering if Paulson and Bernanke are not more the cause of the problem than they are the solution. Between the crooks on Wall Street, and the other crooks in corporate headquarters stealing this nation blind, what in the hell is the average guy supposed to do?

Any thoughts or ideas on your situation?

EDIT TO ADD: Stocks surge after Fed cuts rates to record low

The Dow Jones industrials are up 360, or 4.2 percent, at the 8,924 level Tuesday. Broader indexes have surged more than 5 percent.

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3 Responses to “Fed ready to slash rates amid deepening recession”

  1. comment number 1 by: Bloviating Zeppelin

    Yes, the market wrapped in a good mood today on the heels of the interest rate drop.


  2. comment number 2 by: TexasFred

    Yeah, and with this volatile market it could drop 500 tomorrow…

    Personally, I think the sons a bitches are shooting in the dark…

  3. comment number 3 by: Bloviating Zeppelin

    No disagreement. It’s all about emotions and perceptions and that’s no way to run a railroad.


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