US Fed Rate Is Almost 0

Alchemist

Administrator
Staff member
#1
Yesterday, the US Federal Reserve dropped rates to almost 0 (0%-0.25%).

This practically means that the US has now no monetary tools left to stimulate the economy.

Rates cannot go below 0..:D.

If the economy doesn't recover now, the US government will have to fully rely on its fiscal policies to revive the economy.

This means the government has to keep spending big money till the economy recovers.

The question is where is the money?

The US government already has mammoth debt (over $10 trillion) and has a big budget deficit.

(and there are $50 trillion+ of unfunded liabilities).

Every second sector is begging for a bailout/tax cuts/incentives.

If money has to come from somewhere, it will either be from more debt or fresh printing of money.

Neither of the two is going to do any good in the long-term.

The future of the US economy remains bleak and uncertain.
 
#2
I had some questions regarding this money printing:
How do central banks decide how much money should be printed?
Does any country has a say in it for other country?
 

Alchemist

Administrator
Staff member
#3
I had some questions regarding this money printing:
How do central banks decide how much money should be printed?
Does any country has a say in it for other country?
Governments can print as much money as they want.

However, every time new money is printed, it leads to inflation.

When new money is printed, the value of existing money is reduced.

No one tells a country how much money it can print. However, if a country need assistance from institutions like IMF, these institutions may ask this country to control its budget deficit and do away with unnecessary expenditure.
 

Tara

New member
#4
How does the Fed create money. They say they buy Treasury. But by buying treasury they are merely reinjecting money they removed from the system when they sold the treasury in the first place. So are they really recreating destroyed money, if they had destroyed it in the first place.

So does the economy have a base size, beyond which it cannot be expanded by the Fed and buying and selling Treasury is like you have a balloon and you decrease it and reinflate it but it cannot be reinflated beyond what was its original size.
 
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