Comments on: Fed Cuts To Prop Up Markets?

By: 17 Economists on recessions, stimulation plans, and what they might mean to you | On Financial Success

Wed, 20 Feb 2008 07:33:28 +0000

[...] however, are openly skeptical about a recession, stimulus, or government intervention. And now, the Canadian bloggers are even joining in the [...]

By: Contest Winner, Rate Cut, and Other Good Reads - Jan 25, 2008 | Million Dollar Journey

Fri, 25 Jan 2008 10:32:39 +0000

[...] Other postings about the rate cuts around the blogosphere were made by Consumerism Commentary, Canadian Capitalist and Quest for Four Pillars. [...]

By: deepali

deepali — Thu, 24 Jan 2008 14:41:38 +0000

The shocking thing about the cut was not just that it was so much, but that it happened between regularly scheduled meetings. In fact, it was decided on a holiday. The last time a large cut came in between meetings was after 9/11.

In my mind, this is why I would be concerned about a recession.

By: Y HAT

Y HAT — Thu, 24 Jan 2008 03:50:01 +0000

Central banks might decide to lower interest rates out of concern that a drop in asset prices will spill over to the “real” economy through something economists label the wealth effect. As the stock market falls individuals will feel less well off and decide to curtail consumption to increase savings. This, in turn lowers demand and yaddah, yaddah, yaddha… the economy finds itself in a recession.

In short, the Fed is reacting to falling asset prices (both housing and the stockmarket) in order to manage the broader economy.

By: Four Pillars

Four Pillars — Thu, 24 Jan 2008 03:09:49 +0000

MG – I don’t think anybody knows for sure.

It would kind of suck to be working at one of those “weaker” companies if it went under in a recession.

Mike

By: moneygardener

moneygardener — Thu, 24 Jan 2008 02:57:23 +0000

I think you might be right Mike. It feels unnatural to not let recessions happen and artificially prop up the economy and markets with cheap money. I think the U.S. might need a good recession to clense the system; athough I am no economist so I could be dead wrong

By: Four Pillars

Four Pillars — Thu, 24 Jan 2008 02:50:30 +0000

That’s true Mariam. Lately the government seems pretty determined to keep economic downturns to a minimum but some economists think that it might be better in the long run to have a “good” recession and get rid of weaker companies.

Mike

By: mariam

mariam — Thu, 24 Jan 2008 02:17:38 +0000

The Fed cut was very surprising. I just read somewhere that the last time it was this aggressive was during the tech crash and the low interest rates was what fueled the credit mess. Lower interest rates encourages business spending but also reckless behavior…

By: Four Pillars

Four Pillars — Wed, 23 Jan 2008 23:56:42 +0000

Daddio…very true!

Mike

By: moneygardener

moneygardener — Wed, 23 Jan 2008 23:37:01 +0000

One affect that has’t really been discussed is the fact that lower borrowing rates encourage business development and risk taking. More loans will be taken out, more risks taken, etc. Risk is the backbone of the U.S economy and small business drives much of the economy.