Fed Cuts Rate Again
March 18th, 2008 by Ana
Well, my open letter to the Fed didn’t have any effect (not that I actually thought it would). The Fed has cut the interest rate yet again, by 3/4 of a percent (75 basis points) so look for headlines about how the dollar is further weakened.
I truly do not understand this. Just today, CNN Money says that inflation is the biggest concern regarding the economy in a recent poll of average Americans. Surely the Fed remembers us average Americans? You know, the consumers that are supposed to be driving almost 70% of our economy nowadays (a very dangerous number if you ask me). Funny thing happens when consumers feel there is inflation: they tend to spend less for non-essential (I think the term is “discretionary”) purchases, because most of the money is going to fill the gas tank and refrigerator and pantry.
Then there is this mysterious “consumer confidence” number, and not surprisingly that has been plummeting recently. What is this consumer confidence, and how do they measure it? Anyone have a link that explains it in laymans’ terms? Because this consumer is not feeling very confident right now. Heck, THIS consumer (me) hasn’t felt confident for over a year now.
I know there will some folks who think this latest Fed rate cut is a good thing. According to an MSN MoneyCentral article posted today, this latest rate cut won’t help normal people. Personally, I was shocked to see someone go through the trouble of research to back up my rantings, and even more shocked a mainstream media published it.
So let’s bring the Fed’s latest action to a personal level: My savings interest is going to fall again. I don’t have credit cards, but those rates don’t seem very affected by what the Fed does anyway. No personal loans, no more auto loans. Just a fixed rate mortgage left, so the Fed has basically given the Americans who are trying to be responsible with money the big middle finger. I might as well quit beating around the bush and call this latest rate cut “downright stupid, because that is how I feel.
Thanks for nothing, Federal Reserve Board and Mr Ben Bernake. Please allow me to return that one finger salute.
(Note: there is ONE person on the Fed board who has been sounding the inflation alarm: Richard Fischer from Dallas. My hat’s off to him for fighting the good fight. Now Charles Plosser from Philadelphia has joined in voting against today’s boneheaded move.)
Posted in savings |
March 18th, 2008 at 12:50 pm
It sounds to me like you’re just upset that you didn’t take a variable rate on your mortgage.
(it’s a joke)
This will help anyone on a variable rate mortgage, anyone with a HELOC, anyone with a car loan linked to prime . . . I don’t see how it doesn’t help the average Joe/Jane.
Sure, it doesn’t help savers, but it will help businesses borrow money to stay competitive which helps investors.
It can be twisted any way you want, since there are so many variables. Are you suggesting that now is the time to raise rates and get more foreclosures?
March 18th, 2008 at 1:21 pm
Traciatim, I am MUCH MUCH more worried about inflation!
Hubby’s army pay will not be raised until next January.
My VA Disability won’t be inflation-adjusted until next January.
My GI Bill stipend won’t be inflation-adjusted until next January.
The only income we have that might adjust is my pizza delivery tips, and as inflation bites into the customers, it might go DOWN, not up as inflation increases.
So, faced with the idea of inflation going up with no real way to increase income, yes I am upset about this latest rate cut. And I am not convinced cutting the rates will help the foreclosure rate, if inflation takes off.
March 18th, 2008 at 1:21 pm
“So let’s bring the Fed’s latest action to a personal level: My savings interest is going to fall again. I don’t have credit cards, but those rates don’t seem very affected by what the Fed does anyway. No personal loans, no more auto loans. Just a fixed rate mortgage left, so the Fed has basically given the Americans who are trying to be responsible with money the big middle finger. I might as well quit beating around the bush and call this latest rate cut “downright stupid, because that is how I feel.”
Exactly. My savings account just took a hit. So I guess the idea is to bail out all of the irresponsible Americans with tons of debt and no plan to fix the problem while giving the rest of us the ol’ middle finger salute.
March 18th, 2008 at 4:28 pm
I think people are cautious and paying down there debt and no matter what the goverment does it’s not really working one thing for sure is when the rates rise again it will be for a long time so know is really the best time to buy. For the rest of us be financially responsible and pay down debt and increase your credit rating so you can take advantage of an future lending crisis when the rate adjust again later this year.
March 18th, 2008 at 6:09 pm
This is one of those times where being a live off the land hermit sounds like a decent plan.
March 19th, 2008 at 4:40 am
GI Bill stipends adjust every October.
Re loans with variable rates: it has been established that lenders are really slow to adjust their rates downwards. Of course they’re quick to jack rates upwards with rate increases! And many adjustable rates are not tied to the Fed prime rate, but other indexes like LIBOR.
Ah well, it made it easier for me to zap my savings and pay off the student loan…TODAY! Until recently the savings earned more interest than the student loan cost. Thanks Ben.
Ah well, I’m debt freeeeeee!
March 19th, 2008 at 5:59 am
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March 19th, 2008 at 7:24 am
It’s times like this that we all must remember that we control who we elect to office and use that opportunity to swing things your way. You also have a voice and us it. Great post and thanks for letting them know your thoughts.
I have been continually heart sickend and saden by todays presidency and look to 2009 as a possible change. Till then just more of the same. Nothing wrong with being fiscally responsible and concerned how your savings may decrease.
March 19th, 2008 at 8:27 am
Liz, they make the budget for GI Bill (and army pay, and VA disability) in October for the “fiscal year” but the changes do not go into effect until January. I usually get the two letters from VA (ed and disability) in late November or December.
And congrats on killing off the student loan. Isn’t today the Big Day for you?
March 19th, 2008 at 12:07 pm
I love this post. I don’t own a car so I don’t have a $300 car payment, I don’t have a crazy adjustable rate mortgage that I took out with 0% down, and I am not in the banking industry making big bucks. However, I do see my savings account interest go down, while food prices and everything else keep going up. I am tired of paying — literally — for other people’s messes!
Oh well.
March 20th, 2008 at 4:34 pm
We’ve been talking a lot recently at how much the simple things have gone up in price at the grocery store in the past year or two. And it’s not necessarily just inflation, it’s the fact that high gas prices drive up the cost of almost every consumer good due to delivery costs.
Of course, inflation due to retarded rate cuts, tax rebates that don’t work, budget deficits, and probably a bailout of all the people stupid enough to buy too much house on an ARM, will take its’ toll. Where’s Reagan when you need him?
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