Anyone see the inflation rate for Janurary? 4.28%…It seems like they are caving into wall st pressure to try to sustain a bull market… This is so damn stupid…We’re just going to get in a worse position as the year goes on… We should have been raising rates, not lowering them… I always defended the big wall st firms, and on 99% of things I still do, but I think they have way too much political clout right now…
There are two malevolent forces at work here.
-
Simple politics, the current administration does not want a recession prior to a major election.
-
The need to finance both the existing U.S. debt and new debt created by the war.
The Federal Reserve policy is obviously insane from an Austrian point of view. But it is being indulged in for the two reasons I listed.
A prudent policy would be to raise both the Federal Funds and Discount rate and to start gradually increasing the reserve ratio. Then strap on your belts and enjoy the ride. 
[“I think they feel…?” wtf?–let’s try this again:] They probably think they can’t not lower rates. They know any correction is going to be real ugly, and they are counting on the world’s largest economy to continue expanding. There is some justification for this view in light of our policy of mass immigration.
Real simple. The Federal Reserver BANK is just a bank. Banks like cheap money (Low interest rates) so they can loan it out at higher rates. So the lower the rate the more banks like it. There are two side benefits to this as well. First, the Federal Government likes the Fed to create money by offering lower than market interest rates because it can pay its debts with newly created money and screw the rest of us with a hidden inflation tax. Secondly, the media and economics (Non-Austrian) folks think that the Fed has some divine intuition that it can determine the optimal interest rates for the rest of the economy giving credence to the whole foolish concept.
Because as soon as they cease to do so, a major recession will ensue. They will probably try to stave one off until after the election.
No they full well know that the sooner they stop the faster the recession will end. The Fed is afraid of taking down a large number of banks with the stop while the Government is just afraid of being seen as not doing something.
If they continue down this road for the remainder of this year and into part of next year could this lead to another “great depression”??
These recession talks were very overhyped. We haven’t even had 1 quarter where real GDP is decreasing, yet we’re seeing the highest inflation rate in years, which is also well above the average for the past decade. These banks need to learn their lesson, if they hire idiot traders that cannot price the CDO’s properly, then they should fail. Bernake has to stop watching the dow and start looking at the inflation numbers…