Fed lifts interest rate to 3.75%

Discussion in 'Current Affairs, News and Analysis' started by PartTimePongo, Sep 20, 2005.

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  1. http://news.bbc.co.uk/1/hi/business/4265872.stm

  2. I had just a really odd reaction to that news. Instead of my usual 'interested to know what's going on in world' reaction, I had a more sinister 'I really couldn't give a monkeys how the septics manage in detail the stability of their economy.'

    This may be an odd reaction, but in my current state of mind if anyone could point out to me any possible way this news will affect me I'd be really genuinely grateful.

    PTP - this isn't a slant. I'm just in a really odd mood.
  3. 1929 not yet but the fears of something similar might just now start to niggle. That increase combined with European stagnation and a UK downturn in spending across the board plus an increase in the price of crude oil may (NOT does) indicate the beginnings of a recession.
  4. Oh great. So my useless tw*t of a brother will even have a decent excuse for not finding a job.

    I wish I'd done economics at school. It is a major gap in my understanding of global affairs. Anyone know any good beginner reading material which explains macroeconomics?
  5. I'm not an authority so dont start saving tins of beans yet....its purely speculation based on a model.
  6. Thanks LWM , a succint explaination of why I posted this. I was hoping to have NWD comment first , but no doubt he will when he arrives.

    Now, what are UK interest rates doing/ just done?
  7. Erm...... :roll:

    Sorry, Sir, I haven't done my homework. :oops:
  8. Stupid boy :D

    We had a 0.25% interest cut, to stimulate a flat shopping period, and of course to encourage another upswing in making houses unaffordable for first time buyers

    America raises it's interest rates, we cut ours.......
  9. They might have figured that they can rely on massive Govt. spending to give a boost to the economy ($50bn already earmarked for reconstruction, with at least another $150bn to follow soon.) Good old fashioned Keynesianism at work- paying people to dig holes. What's more, an increase in interest rates might stop the decline in the value of the dollar as overseas investors send money to US banks.

    But then I do diplomatic history and security policy for a living, not economics, so I could be talking b0llocks. I'm sure there's someone out there who could explain the process better without 10 pages of equations and graphs (but he/she won't be an economist either).
  10. New York is an ocean away from London geographically, but financially it's right next door.

    American monetary management is a major influence on the financial affairs of most of the rest of the planet.

    The USA has an ominously large current account deficit which approximately means that it imports much and exports rather little.

    As a result, the commercial banks of the rest of the world accumulate large quantities of dollars.

    The governments and central banks of these foreign lands have an inducement to frustrate the law of supply and demand and prevent the local currency from rising against the dollar. To varying degrees, these countries have large industries dedicating to serving the American export market. Anything, including a falling US dollar, that makes exports more expensive to the American consumer is thus perceived as a bad thing.

    With the passing of time, foreign central banks accumulate ever larger US dollar reserves. Anxiety sets in, so far as foreign central bankers realize that they are tying their countries' fortunes to the US dollar. After all, they must reflect, what happens if the dollar loses most or all of its value?

    We have a sensitive, fragile situation. If any one major US exporter, say, for instance, China, were to start selling off its dollars in the foreign exchange market, it could precipitate an avalanche as everyone else joined in to salvage something from the impending wreck.

    All other things being equal, the higher US interest rates, the greater the inducement to continue holding dollars.

    In my opinion, a substantial consideration behind the current series of increases in the increase in the target interbank overnight loan rate -- called the federal funds rate here -- is a desire to avert a run on the dollar in the foreign exchange market.
  11. Overseas governments and investment companies still keep buying US Tresury Bonds. So the "Pros" have decided the best place for their money, an increase in intrest rates helps keep up value of Yankee $.
    I find it disturbing.
  12. Something called a 'Run'?..................I believe Mary Poppins can be cited as a fair illustration!
  13. http://www.msnbc.msn.com/id/9417904/

    The US govt in a knee jerk reaction to hurricane Katrina is about to add 200 bn dollars to its already massive bugdet deficit.All this to placate its critics who say it treated black people down in New Orleans like garbage.Bush presumably has no clue where the money will come from.He has ruled out raising taxes so obviously the money will be borrowed (most likely from the Saudis who are just about the only US friendly people with that much money in cash reserves.)And now hurricane Rita with all her category 5 might is barreling down towards Texas.Rita is bigger than Katrina so more damage is expected.Even if its only half as bad as Katrina thats still $100 bn.Not exactly bread and milk money.
    The people of Texas will more than likely cry foul if the Federal goverment does not foot the bill for this latest storm and it will (Texas is predominantly white.)This means that in the last two weeks the US is at least 300 bn dollars more in the hole than it was a month ago.Its trade deficit is increasing by the day.This is only half way into hurricane season.There is at least two big storms on the way.Each might cost at least 50 billion more.Oh there is always next year.Same weather sequence.Maybe worse.Can you spell trillion?I predict in 12 months a trillion or more in debt.
    If the US was a business competing on the open fair market it would be so bankrupt its owners would be in jail.Or if its shareholders had any sense they would vote in a new management.
  14. I can't even write in 'figures' a trillion.
    disturbing F-ing disturbing.