>>it is reasonable to ask whether it is trying to help the economy or the banks.

Isn't that already clear? Taking boat loans and subprime rubbish paper by the tens of billions as collateral against loans at the discount window...the fix is in...and every US citizen with savings in dollars is going to pay for it.

They actually are making it difficult for anybody to want to save in dollars. I'm big on saving money. It's the only way I see out of our $9 trillion debt. I wish the next president would consider having Series EE savings bonds again that pay 6% interest just as the first bank of the United States paid 6% when Hamilton opened it for business. I'm at the point where I'm thinking when my CDs come due, I may just take the money and pay off my mortgage at 5.25%. Paying off debt is the same as savings, only I'd rather be doing both at the same time.

These same-day market swings are probably due to shortcovering in the futures. Fortunes have been made on the short side in a very small amount of time.

Trying to assign some deep and dark nefarious reason in this short, short amount of time is simply politics and the art of deception.

It's absolutely clear the Feds are bailing banks. Country Wide was a bailout. It does nobody any good to have this being an open motive. A major meltdown would occur and affect everyone if you live in the US and have a bank account.

They are bailing out the banks, of course. But it's not going to help for long.

We's goin' down, baby.

Mortage rates have definitely come down. Atleast for now, mortgages are cheaper since the Fed moved aggresively. Any thoughts?

Vara

"Atleast for now, mortgages are cheaper since the Fed moved aggresively. Any thoughts?"

Not ARMs, they are reseting to double digit rates, some as high as 12%.

If you have a FICO of 730+ you can get a low interest rate, otherwise your rate is skyrocketing.

our friends at the Mortgage Bankers Association show the 30-year rate rising from 5.49 percent two weeks ago to 5.60 percent last week [http://www.mortgagebankers.org/].
With the 10-treasury rate rising in response to the rate cut, it looks like it will be higher again this week.

The Fed appears to be pumping money into the system for a number of reasons. The one that is the most obvious is that the banks are all insolvent. Additionally, all of the investment capital left for the exits last summer when the hedge funds at Sterns went bust. Now it's panic time and the Fed is just doing what the Fed does best. Make a bad situation worse.

I'm like you LJM. I'm saving money, or at least not spend it unnecessarily on things I possibly do not need. It is obvious the FED is helping out banks at all costs. After Ben and Hank tried all tricks in the book and failed, they resorted to this cheap one. It is obvious they want the 'good old times' to come back. For this reason they will try and push through the congress legislature allowing Fanny and Freddy to guarantee combo loans. If this happens the next wave of foreclosures will be covered by the taxpayers and the writeoffs this time around will dwarf anything in the past by a magnitude of at least several times. This is because at 700k of borrowing power even prime borrowers can cave in and very quickly lose their good standing status if there is the slightest mishap in their finances.

The Banks.

The Roman Empire lasted 800 years. Things fell apart and the centre could not hold when the currency was debased for the last time.

Now what if there had been an Emperor 200 years into the Roman empire who said: "I am not like the others. I am the Great Academic! I tell you in advance that I will clip your coins and dilute the metal in your coins, for I am the Emperor and all things shall be rosy thru me!

Then along comes Mr. Bubblehead, who has lived in an Ivory Tower, and he is given great power in the US Empire only 200 years old. Being an academic, he publishes in advance that he will save the Empire from the Great Deflation.

Mr. Bubblehead stated: " We will print money with total abandon until we are zero bound. Then we will buy with further printed dollars all manner of physical assets, even antique cars. Then, with interest rates at zero, and all appears lost, we will engineer a 50% devaluation of the US Dollar in the footsteps of the great Emperor Roosvelt, who confiscated the gold of the people, with nary a peep".

Long live Mr. Bubblehead!

When Ron Paul pointed out in a Senate hearing that Helicopter dumps would destroy the savings of the middle class and millions of baby boomers about to retire, Mr. Bubblehead stared into space, content in the thought that he had spoken, and all will eventually bow before him.

The over-under on the rule of the US Empire must be a lot less that 800 years. Nobody 2000 years ago would be so stupid as to announce a debasing of the currency in advance.

Ron Paul? The Gold Standard? You are joking?

The Helicopter analogy is fitting, as it was invented by Milton Friedman to prove the notion that inflation is caused by too much money casing too few goods. That he could not explain how money got into the system but had to invent an analogy did not stop him becoming well respected.

The problem is that a real economy does not work that way. A real economy does not use helicopters to increase the amount of money. Rather, banks do that by extending credit -- which is used to increase the amount of goods in an economy.

In other words, the money supply is not controlled by the state but rather it adjusts to the requirements of the economy. Try to control it, as the Monetarists tried, and it failed. Forcing banks to use the gold standard will not work, as the banks will get round it (as they did in the 19th century). In the process, though, the economy will be made much worse -- as was the case when the Monetarists failed to control the money supply in the 1980s.

After all, the 19th century was marked by extensive recessions, depressions and panics. In the latter half of the century, it was in recession about half the time. In the latter half of the 20th century, it was more like a fifth.

So, there is a reason why the gold standard was abolished -- it was not applicable to an advanced economy (regardless of what von Mises and Rothbard asserted).

Anarcho, I don;t think you are correct about monetarists failing to control the money supply in the 1980s. I don;t think either of the fed chairman in the 80s were monetarists. I think monetarists, like Milton Friedman advocate allowing the money supply to grow at some set rate no matter what. They do not try titrate based on inflation and economic growth.

Erik L. wrote,
Anarcho, I don;t think you are correct about monetarists failing to control the money supply in the 1980s.I don;t think either of the fed chairman in the 80s were monetarists. I think monetarists, like Milton Friedman advocate allowing the money supply to grow at some set rate no matter what. They do not try titrate based on inflation and economic growth.

That's a correct narrow-scope def'n of monetarist.

IIRC they did try in the 1980s, but in Britain not the US. They failed.

The banks. Joe Six-Pack is going to get hosed for size.

To that end, I hope someone in the media will take the time to expose the FHLB loans to Countrywide. With its application of subsidized credit, it was a bailout in all but name, and it put taxpayer money at risk to help a private company. Nobody in the media seems to want to talk about it, but someone should be defending Joe Six Pack and his tax dollars.

There are about another half a dozen stealth government bailouts being discussed or implemented. Perhaps the media could focus some attention on this small matter?

After all, the 19th century was marked by extensive recessions, depressions and panics. In the latter half of the century, it was in recession about half the time. In the latter half of the 20th century, it was more like a fifth.

Most of this can be attributed to regulation rather than the gold standard.

Ask yourself how much inflation was experienced while we were on the gold standard?

The banks, of course. And they're doing it so far and so fast that I'm thinking (if you can call my mental processes thinking) that we may be in real trouble.

Here's a paper on when the Fed supposedly switched from targeting M1 to federal funds

http://research.stlouisfed.org/wp/2004/2004-015.pdf

A lot of confusion and contradiction, and most of what people think and say about this is just wrong. I have been looking at past interest rates in considerable detail and would agree with Thornton's date of 1982 for going back to federal funds.

I am still working on when they ostensibly started targeting monetary aggregates in a meaningful way. The minutes of the Open Market Committee back to 1978 say that they identified desired ranges of M1, M2 and M3 growth, and then set a target number or range for federal funds.

Exposing the govenment's bailout of Country Wide would cause serious problems in my opinion. I hate the fact it was done, but CW going down the tubes in flame would have a tremendous impact on almost everyone who borrows. I hate CW but probably had no choice. Investigate their lending practices but not the effort to save them. BOA borrowed Fed Funds for their $2B investment in CW. Things need to change to prevent other CW's to profit in such a manner and be able to bail on us.

Wow. It's amazing how great the economy is in Europe. Watching the US economy is like watching a train wreck in slow motion.

America is about to become a third world economy. Kharma is a bitch.

Well, the question we need to ask is WHO OWNS THE FEDERAL RESERVE SYSTEM?

http://www.geocities.com/northstarzone/FED.html

All this going on and CNN's feature story this morning is a special on Dominos Pizza Online Ordering System LOL

Of course the Feds are bailing out the banks. They know people are gonna use the measly $600 'financial stimulus package' to pay down their credit card balances, except for a desperate few that will use it to buy food.

Anybody else wondering if we should count the gold in Fort Knox? They HAVE to be backing up all this check writing, bomb buying and money printing with something... I'm suspicious that gold is being transferred out of the country to back the massive debts. Why else would China, Japan, et al be bothering to even talk to us, much less lend us money?

If an Empire ever deserved to go the way of the passenger pigeon, boy is it this one...

For some people the obvious takes a little longer to sink in.

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