Posted on 01/22/2008 5:29:53 AM PST by Perdogg
Federal Reserve makes emergency rate cut.
(Excerpt) Read more at msnbc.msn.com ...
Thanks, that one works! :) BTW, at -170 now. Obviously not good, but maybe we’ll end the day somewhere north of -500 and take some of the panic out of all of this.
So, if we use interest calculations from the ‘70s, what do we have really? I recall they peaked at around 21 percent then. And the 10.7 percent unemployment rate then would be ...what today? Those were rhetorical questions.
We knew we were in an inflationary cycle as soon as gold started going up...and speaking of different calculations, gold prices would have to go up to $2,200 in todays dollars to match the peak during the recession in the 80s. Not saying it won’t happen. Jut wondering why everyone seems to be so anxious to jump the gun.
“Should I re-balance at this time for more domestic stuff? Or just ride it out...?”
Depends on how old you are.
If you are decades from retirement or even a decade, pick good stocks and maximize your 401k and IRAs over the long run. Good US and foreign indexes like SPY, MDY will do well over the long run.
Finally my two sons, both 40 something, realize that recessions are good for their investments in their 401K’s and IRAs. They get to buy low and will ride through several cycles before retirement.
Yes?
If this is a hiccup compared to Carter's years, and Carter's years were a hiccup compared to the Great Depression, this is nothing. Your point is made better than you thought.
No Depression has some key indicators, and not all of them were met.
The main crush in a Depression is Unemployment, and believe it or not during the Carter Years Employment actually rose the majority of his term. And more importantly Each years employment figures ended higher.
That my friend does not even come close to a a Depression.
Press Release
Release Date: January 22, 2008
For immediate release
The Federal Open Market Committee has decided to lower its target for the federal funds rate 75 basis points to 3-1/2 percent.
The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.
The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.
Appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Eric S. Rosengren; and Kevin M. Warsh. Voting against was William Poole, who did not believe that current conditions justified policy action before the regularly scheduled meeting next week. Absent and not voting was Frederic S. Mishkin.
In a related action, the Board of Governors approved a 75-basis-point decrease in the discount rate to 4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Chicago and Minneapolis
http://www.federalreserve.gov/newsevents/press/monetary/20080122b.htm
What is unjust is that a guy who pays all his taxes on his earnings and has a little left over to invest pays ANYTHING on the earnings from investments he could only make after HAVING PAID INCOME TAXES ALREADY.
What about an investment that goes up say 3% per year. Must he pay taxes on that when he sells, even though inflation ate up all those gains? Yes, he must pay taxes on inflation, even though he is not better off. Is that "just?"
Then he gets to pay again when he's dead. And the companies in which he invests pay taxes on their income.
How many layers of taxation are you in favor of? Three? Four? Five?
The economically correct tax rate on capital gains is ZERO. Ask among economists. That will both maximize growth, and maximize revenue to the Treasury, because rampant investments cause employment, productivity growth, income growth and income tax growth. Capital gains taxes just get in the way of that virtuous cycle.
Thank you. I was beginning to think nobody was getting it.
Ok. Then it wasn’t a depression. It probably only seemed like one to the unemployed and their families. Our family was caught in the collapse of the US steel industry. Speaking of the Carter era, nobody here has called for the Bush administration’s backs to be first against the wall when the Revolution comes. Yet.
But how? I don’t understand that. Unless I am buying a home, which I’m not, how does it benefit ?
Ding, ding, ding - 0 for 3.
BTW, the misery index was popularly touted by Ronald Reagan, not Carter. It was a dig at Carter.
Well, the only thing the rate cut will do is insurre the Dow drops 300 points today, rather than 900.
What they really need to do is to CUT SPENDING and CUT TAXES, especially corporate taxes.
They should make additional cuts in the short term as needed, however.
“the 1970s were depressing”.
*****
LOL! How true! No redeeming features except the birth of my son in the bicentennial year.
The temporary rise in equities will provide a perfect opportunity to short the US market.
congrats on the mortgage payoff. As far as more rental properties, four is enough for me, as I just now came back from “fixing” a toilet problem (really was no problem, except that our 87 year old tenant doesn’t know how to jiggle the handle). Here in Michigan the rental market is down, as far as rents are concerned, but still this is an investment and the payoff comes down the road.
“How many layers of taxation are you in favor of? Three? Four? Five?”
From a philosophical point of view, I disagree with the income tax in it’s entirety. But the political reality is that we’re stuck with the income tax. If you take the income tax as a given, then the question becomes who are you going to tax? That’s a values driven discussion. In my view, the Joe who earns $75,000 a year should not be paying a marginal income tax rate on his earnings that is roughly double that which someone who is earning their income from capital gains.
Inflation is a red herring since both wages and capital gains are impacted.
The economically correct tax rate on capital gains is ZERO.
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Romney proposes a zero tax rate on any money gained through savings: interest, cap gains or dividends for tax-filers with earned income under %200000. That would do a lot to encourage all workers to save, aka invest, for their own future.
You're right . . . but the prime interest rate will likely be reduced as well. That's exactly what happened at least the last two times the Fed cut rates in late 2007.
Keep in mind that the Fed may still cut rates even further at the end of January.
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