Fixin to get ready to do something substantive!
What a fool this man is.
I fail to see how destroying the dollar improves the economy.
Means they were not ready to do something substantiative before!
And how glad I am that Ben is in charge and not a bunch of gold bugs who would lead us into a depression.
signaling .5% cut to both rates.
All I can do is shake my head....
and this word comes to mind
“Stagflation”
maybe rates will finally go low enough for me to consider refinancing the house
Hm. I read the headline as “Fred ready for ‘substantive’ action.” Figured it was about his big endorsement.
I hate the Fed, hate, hate, hate. Time to go back to the gold standard.
Oh good - let’s devaluate the dollar even further to compensate for a few bad mortgages. DUH!
He's just trying to get through the next election before the sh't hits the fan. Stagflation is on the way. Creating cheaper debt is not a solution, it was the problem. Failure of trade deals to produce the 'good paying jobs' is the problem. The problem ignored, is the problem unsolved.
Gold and euro explosion after Ben remarks.
The use of "substantive action" along with the "easing" of policy sounds like they might well be considering what was called the Quantitative Easing Policy (QEP) in Japan; certainly, it has been discussed before by the Fed.
For instance, a quick search yielded this bit:
III. Expanding the Size of the Central Bank's Balance Sheet
Besides changing the composition of its balance sheet, the central bank can also alter policy by changing the size of its balance sheet; that is, by buying or selling securities to affect the overall supply of reserves and the money stock. Of course, this strategy represents the conventional means of conducting monetary policy, as described in many textbooks. These days, most central banks choose to calibrate the degree of policy ease or tightness by targeting the price of reserves--in the case of the Federal Reserve, the overnight federal funds rate. However, nothing prevents a central bank from switching its focus from the price of reserves to the quantity or growth of reserves.
When stated in terms of quantities, it becomes apparent that even if the price of reserves (the federal funds rate) becomes pinned at zero, the central bank can still expand the quantity of reserves. That is, reserves can be increased beyond the level required to hold the overnight rate at zero--a policy sometimes referred to as "quantitative easing." Some evidence exists that quantitative easing can stimulate the economy even when interest rates are near zero; see, for example, Christina Romer's (1992) discussion of the effects of increases in the money supply during the Great Depression in the United States.
Quantitative easing may affect the economy through several possible channels. One potential channel is based on the premise that money is an imperfect substitute for other financial assets (in contrast to the view discussed in the previous section that emphasizes the imperfect substitutability of various nonmoney assets). If this premise holds, then large increases in the money supply will lead investors to seek to rebalance their portfolios, raising prices and reducing yields on alternative, non-money assets. Lower yields on long-term assets will in turn stimulate economic activity. The possibility that monetary policy works through portfolio substitution effects, even in normal times, has a long intellectual history, having been espoused by both Keynesians (Tobin, 1969) and monetarists (Brunner and Meltzer, 1973). Recently, Javier Andres, J. David Lopez-Salido, and Edward Nelson (2003) have shown how these effects might work in a general equilibrium model with optimizing agents. The practical importance of these effects remains an open question, however.
Quantitative easing may also work by altering expectations of the future path of policy rates. For example, suppose that the central bank commits itself to keeping reserves at a high level, well above that needed to ensure a zero short-term interest rate, until certain economic conditions obtain. Theoretically, this action is equivalent to a commitment to keep interest rates at zero until the economic conditions are met, a type of policy we have already discussed. However, the act of setting and meeting a high reserves target is more visible, and hence may be more credible, than a purely verbal promise about future short-term interest rates. Moreover, this means of committing to a zero interest rate will also achieve any benefits of quantitative easing that may be felt through non-expectational channels.
Lastly, quantitative easing that is sufficiently aggressive and that is perceived to be long-lived may have expansionary fiscal effects. So long as market participants expect a positive short-term interest rate at some date in the future, the existence of government debt implies a current or future tax liability for the public. In expanding its balance sheet by open-market purchases, the central bank replaces public holdings of interest-bearing government debt with non-interest-bearing currency or reserves. If the open-market operation is not expected to be reversed too quickly, this exchange reduces the present and future interest costs of the government and the tax burden on the public. (Effectively, this process replaces a direct tax, say on labor, with the inflation tax.) Auerbach and Obstfeld (2003) have analyzed the fiscal and expectational effects of a permanent increase in the money supply along these lines. Note that the expectational and fiscal channels of quantitative easing, though not the portfolio substitution channel, require the central bank to make a credible commitment to not reverse its open-market operations, at least until certain conditions are met. Thus, this approach also poses communication challenges for monetary policy makers.
Japan once again provides the most recent case study. In the past two years, current account balances held by commercial banks at the Bank of Japan have increased about five-fold, and the monetary base has risen to almost 30 percent of nominal GDP. While deflation appears to have eased in Japan recently, it is difficult to know how much of the improvement is due to monetary policy, and, of the part due to monetary policy, how much is due to the zero-interest-rate policy and how much to quantitative easing. The experience of the United States with quantitative policies is limited to the period 1979 to 1982, when the Federal Reserve targeted nonborrowed reserves. Of course, nominal interest rates were not close to zero at that time. The U.S. experience does suggest, however, that the demand for reserves may be sufficiently erratic that the effects of quantitative policies may be intrinsically hard to calibrate.
(From Conducting Monetary Policy at Very Low Short-Term Interest Rates by Bernanke and Reinhart.)
In Japan, QEP did seem to work; at least its use did coincide with a resurgence of the Japanese economy from its deflationary spiral.
I also noticed a decent writeup with a bit more on the mechanical side of this at Pimco: Tomoya Masanao Discusses the End of Quantitative Easing in Japan.
Would they manufacture a crisis, just so they can prove how well they can “support” the nation through it?
The whole thing reeks to me.