The 2007 Subprime Mortgage crisis

You just contradicted yourself and many of your previous posts in this thread! And there's no "magic" to it. The Fed can and does raise and lower the benchmark interest rates!!! The federal funds rate is a benchmark interest rate. It is the rate at which American banks lend to each other in dollars. Many other interest rates are calculated from it; the federal fund rate plus 0.25 percent, for example, would be the interest rate on a loan to a large company. And the Fed changes that rate! And when the Fed changes that rate, it forces banks to change their interest rates accordingly. On January 30, 2019 the Federal Reserve said that it would keep its target range for its benchmark interest rate at 2.25% to 2.5%.

Now why is this so important to you?

 

What you don't seem to understand is that the Fed funds rate does not automatically transfer over into interest rates in the economy in general. One does not control the other.

That means the Fed does not really have a direct way to control interest rates (in general).

Private banks are not going to lend to each other if the Fed funds rate departs too far from the general rate, they'll simply get it from somewhere else, like their depositors, or the Fed itself will be the one that has to lend them the money, making the issue of the Fed funds rate mostly irrelevant, because now we're talking about the Fed having to lend out money in the economy to change interest rates (back to what I was referring to earlier).

 

Because it costs a lot of money for the Fed to change interest rates. That's what you don't seem to get.

It's very wasteful to the economy.

They also don't have complete control over it, in all situations. That means you can't totally rely on the Fed to control these rates in an economic emergency.
You have to understand how the Fed attempts to control rates before you can understand how something could go wrong.
For example, hypothetically there could be massive inflation and high interest rates, with nothing the Fed could be able to do to stop it.
Or the Fed might be able to keep interest rates down, but at the cost of not being able to control inflation.
They don't have complete power over interest rates and what inflation is.

Some people mistakenly think nobody has to worry about the economy because the Fed could just solve any problem.

 

Did I say it does? Or are you just looking for an opportunity to argue?

 

I don't? What is your evidence that I "don't seem to get" it?

The Fed, the FOMC, and the whole banking system is a major problem.

 

Not when that economy has runaway inflation ... !

 

What are you even talking about?

If the Fed doesn't want to cause inflation the last thing they should do is try changing interest rates from what they would otherwise be in the free market.

 

What do you think?

 

exactly

 

And you are Thmart too. It's very obvious from your reply

 

The FRB sets the rates in the "open market" as do ALL CENTRAL BANKS ON EARTH ...

 

It's not a direct connection.

Think about it a little bit. Yes, the one has some influence on the other, but setting the FRB rates isn't neccessarily going to set the rates on the open market.

 

It sets the bottom rate, so when it goes up or down, the rates follow in the same sense ...

 

I think you are child guessing about what caused the recent housing crisis which was caused by massive libcommie interference with the self-correcting free market.

 

so then what keeps inflation at 0% ? Why isn't it at 10000%?

 

dear, it means nothing to talk about a free market for money since one has rarely existed in human history. If you want to speculate about a free market you have to give us the banking/money laws in this imaginary free market. Do you understand.

Rand Paul did ask Bernanke why he doesn't support a gold standard. Bernanke replied that he ran the Fed as if it was on a Gold Standard.

 

You are funny

 

One way to do this is to extend unemployment benefits.

 

They do so as the Principle Measure of a Central Bank to influence Consumption. Lower the rates, and Consumption expands. Raise the rates and Consumption diminishes.

Thus, Fed rates are THE KEY MECHANISM to fighting an inflationary economy. They also work in the reverse - that is lower the rates and Consumer Demand typically expands.

Both mechanisms are key controls of the economy when necessary. That is when Demand is flagging or when Demand is soaring. In both instances the Fed will intervene. Which is what is expected of the Fed, and remains its principal raison d'etre.

Why is this such a difficult concept for you to comprehend ... ?

 

Why would you think that?
You think an economy can run on interest-free loans?

No.

If the Fed wants to prevent creating inflation, the best thing they can do is not try to change rates in the economy.

Them trying to change rates will inherently tend to carry an inflationary cost.

Like I said, it costs money to change rates.

I find it laughable that you have this idea that offering lower rates could somehow counteract inflation. Rather it's just the opposite, really.
All economists know there's some inherent trade-off between keeping rates too low for too long and inflation.

 

American per-capita "Consumption Debt' is one of the largest of any developed country.

And its prime determinant is the Federal interest-rate, which dictates bank lending rates.

(Which is why Donald Dork wants the Fed to bring down rates, so he'll be looking good at the next election.)

Yes, the FRB sets the rates that have a great impact on Consumption. But, by doing so, it does not "create inflation".

If people want to buy beyond their means and they do so in persistent fashion such that Demand outstrips Supply, then prices will rise.

This is the key factor of inflation creation.

 

you don't think there was massive liberal interference in the housing market in 2008???? See why we are forced to conclude that liberalism is based in pure ignorance?

 

Econ 101 class one day one: lowering rates lowers loans and thus lowers inflation. In 1980 inflation was 15%; they raised rates to 20% until inflation disappeared. You should try college. They teach you things.

 

No, 'everyone' does not agree. A simple comparison of a Progressive with a liberal on issues like tolerance and free speech etc, shows you exactly how illiberal Progressives are.

 

Gibberish because you don't like it.