drieuxster (drieuxster) wrote,

Serious Reasons to Send Caribou Barbie Back Beyond The Tundra

Yet another week of institutional changes that render all those nice macroeconomic texts and professors' lecture notes obsolete. The interest rate at which banks lend their Federal Reserve deposits to one another overnight is known as the fed funds rate. For the last 20 years, U.S. monetary policy has been primarily implemented by setting a target for this interest rate.... The Fed announced on Tuesday that it will raise the interest rate it pays on both required reserves and excess reserves to the level of the target itself, currently 1.0%.
This means a couple of things for Fed watchers. First, fed funds futures contracts... are primarily an indicator of how these institutional factors play out... signal little or nothing about future prospects for the target. Second, the target itself has become largely irrelevant.... There's surely no benefit whatever to trying to achieve an even lower value for the effective fed funds rate....

[ cf James Hamilton Calls for Quantitative Monetary Easing ( emphasis mine )]
Hum, what if there were an ugly economic issue or two that would really need to be dealt with.

What if the GOP were to need to sober up, and get past their Ideological Commitment to Fundamentalist Triumphalist Milton Friedmanesque Free Trade In Free Marketing Mythos... and opt back into the real world, where there will need to be real world solutions bigger than a sound byte.

{ hey kids, would this be a bad time to remind americans that some RUDE people were wondering why it was under green span, in the run up of the Housing Bubble, that in spite of all of the lever pulling, the 10 Year never got to 3 percent, so as to really drive down the actual mortguage costs.... Or should we just spin past that and remind people that the Swift Boaters did not like Kerry.... }
Tags: economics

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