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Wed Jan 27, 2021, 04:49 PM

Fed Stresses Its Commitment to Low Rates for the Long Run

Source: NBCWashington

By Christopher Rugaber

The Federal Reserve pledged on Wednesday to keep its low interest rate policies in place even well after the economy has sustained a recovery from the viral pandemic.

The Fed said in a statement after its latest policy meeting that the improvement in the economy and job market has slowed in recent months, particularly in industries affected by the raging pandemic. The officials kept their benchmark short-term rate pegged near zero and said they would keep buying Treasury and mortgage bonds to restrain longer-term borrowing rates and support the economy.

The policymakers also warned that the virus poses risks to the economy and removed phrases from their previous statement that had said the pandemic was weighing on the economy in the “near term” and that it posed risks “over the medium term." The removal of these phrases suggests that Fed officials aren't sure how long the uncertainty will last.

For now, the job market, in particular, is faltering, with nearly 10 million jobs still lost to the pandemic, which erupted 10 months ago. Hiring has slowed for six straight months, and employers shed jobs in December for the first time since April. The job market has sputtered as the pandemic and colder weather have discouraged Americans from traveling, shopping, dining out or visiting entertainment venues. Retail sales have declined for three straight months.

Read more: https://www.nbcwashington.com/news/national-international/fed-stresses-its-commitment-to-low-rates-for-the-long-run/2553314/

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Response to Wicked Blue (Original post)

Wed Jan 27, 2021, 05:04 PM

1. Supercalifragilisticexpealidocous

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Response to Wicked Blue (Original post)

Wed Jan 27, 2021, 05:34 PM

2. The reason we're in this mess, aside from the pandemic, is Low Rates for the Long Run

QE 1-2-3 created distortions in the economy. Specifically capital was and remains cheap. Every fool who has delusions of riches can borrow. Every corporate wife has a side business that's little more than a tax write off. Thus so many cafes, bakeries, and gift shops. The distortion is extreme numbers of small businesses to the point of pure competition where profits are driven to zero. There is no future in many of these businesses.

Now Powell will do it again. This time they destroy the currency. Powell is crazy in my opinion.

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Response to bucolic_frolic (Reply #2)

Wed Jan 27, 2021, 06:34 PM

3. We are in this MESS because of many reasons and low interest rates is NOT one of them...

The major reason we are in this MESS is because the American people voted in the most incompetent corrupt administration in the history of America....

If interest rates had risen over these last 5 years to keep banks and the rich people with money on the sidelines happy, we the people would have suffered even more....

Wherever you get your data from, please recheck your thoughts...the tea party monetary philosophy will never again be viable...and for a very good reason...it only benefits the wealthy.

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Response to pbmus (Reply #3)

Wed Jan 27, 2021, 06:44 PM

4. Please recheck your thoughts also, low rates got us into this mess from 2009 through the present

Loose money is the only remedy the Fed has, and while it is advisable in the short term because payrolls are diminished and shrunken, in the long run they are destroying the currency because as the 1970s taught us, they will be unable to mop up the excess liquidity before inflation ramps up.

Bernanke ran QE1-2-3 then some more, and Powell has loosened the Fed's balance sheet to include buying corporate bonds. It's been all over the news for the past year, and his loose money to support Trump's growth is widely known.

The reason we have such low interest rates is QE1-2-3 and its successors. You can't have 0-2% interest rates with tight money policies.

Cycles of boom and bust are created by periods of loose and tight money as well as government cycles of deficit spending and austerity.

What did the Fed do in 1929? After a period of loose money they tightened beginning in March.

I've been called a lot of things, but Tea Party monetarist is not one of them because I don't believe in them, don't follow them, don't support Friedman.

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Response to bucolic_frolic (Reply #4)

Wed Jan 27, 2021, 07:01 PM

7. First, you are a mainstream theorist and I am a modern money theorist...

We will never agree so I will refer you to...

Modern Monetary Theory or Modern Money Theory (MMT) is a heterodox[1][2][3][4][5][6] macroeconomic theory that describes currency as a public monopoly and unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires.[7][8]

MMT is an alternative to mainstream macroeconomic theory. It has been criticized by well known economists but is claimed by its proponents to be more effective in describing the global economy in the years following the Great Recession of 2007–2009.[9][10]

MMT argues that governments create new money by using fiscal policy. According to advocates, the primary risk once the economy reaches full employment is inflation, which can be addressed by gathering taxes to reduce the spending capacity of the private sector.[11] MMT is debated with active dialogues about its theoretical integrity,[12] the implications of the policy recommendations of its proponents, and the extent to which it is actually divergent from orthodox macroeconomics.

MMT's main tenets are that a government that issues its own fiat money:

Can pay for goods, services, and financial assets without a need to first collect money in the form of taxes or debt issuance in advance of such purchases;
Cannot be forced to default on debt denominated in its own currency;
Is limited in its money creation and purchases only by inflation, which accelerates once the real resources (labour, capital and natural resources) of the economy are utilized at full employment;
Can control demand-pull inflation[13] by taxation which removes excess money from circulation;
Does not compete with the private sector for scarce savings by issuing bonds.
These tenets challenge the mainstream economics view that government spending is funded by taxes and debt issuance.[14][15][12] The first four MMT tenets do not conflict with mainstream economics understanding of how money creation and inflation works. For example, as former Chair of the Federal Reserve Alan Greenspan said, "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default."[16] However, MMT economists disagree with mainstream economics about the fifth tenet, on the impact of government deficits on interest rates.[17][18][19][20][21]

https://en.wikipedia.org/wiki/Modern_Monetary_Theory

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Response to Wicked Blue (Original post)

Wed Jan 27, 2021, 06:55 PM

5. Long gone are the days of 12% CD rates that were perfectly safe unlike the stock market.

And here we all are. Rule was SAVE and make interest on your money. Moved into our condo 23 years ago. At the time, the condo Association had a huge bucket of money due to rolling over CDs as they matured. The retired folks living here at that time were living off of their interest and not even having to touch their principle. It all made sense if you had done 'the right thing' prior to retirement. And then the shovel broke . . . . Please correct me if I am missing something here.

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Response to MOMFUDSKI (Reply #5)

Wed Jan 27, 2021, 06:57 PM

6. Also long gone, the 15% mortgage rates of the early 1980s, thank heaven nt

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