{"id":194063,"date":"2008-10-28T18:00:00","date_gmt":"2008-10-28T23:00:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2008\/10\/28\/economics-update-355\/"},"modified":"2008-10-28T18:00:00","modified_gmt":"2008-10-28T23:00:00","slug":"economics-update-355","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2008\/10\/28\/economics-update-355\/","title":{"rendered":"Economics Update"},"content":{"rendered":"

OK, the markets went wild on the expectation that the Fed will cut rates tomorrow<\/a>….I’m not impressed, truth be told….As I’ve said before, I think that the Fed is pushing on a string with interest rates.<\/p>\n

What is or more interest is the fact that the Federal Reserve’s intervention in the commercial paper market has appeared to raise rates<\/a>, rather than lower them. From Bloomberg: <\/p>\n

Yields on commercial paper rose as the Federal Reserve began buying the debt directly from companies, showing the central bank’s efforts to unfreeze short- term credit markets have yet to take hold.<\/p><\/blockquote>\n

I think that the Fed is looking at a monetary solutiuon, when the solution is government legislation and government spending.<\/p>\n

Still, this has not stopped GMAC from going in with the Fed’s commercial paper facility.<\/a><\/p>\n

BTW, the Fed is doing something else, currency swaps with other central banks, most recently the Central Bank of New Zealand<\/a>, though it has set up similar arrangements with Australia, Canada, and Japan too.<\/p>\n

It’s supposed to help maintain liquidity, but I have no clue how this works. Anyone want to explain this to me?<\/p>\n

What I do understand is the Federal Reserve going into the commercial paper market in the US. Ge just borrowed $5 billion from the fed<\/a>.<\/p>\n

Of course, even there, there is stuff that I don’t get, like why is the Federal Reserve starting to buy foreign<\/span> commercial paper<\/a>?<\/p>\n

In any related news, the Treasury is looking at extending the bailout to privately held banks<\/a>, though one wonders how they get a meaningful equity stake, as Bush<\/del> Paulson and His Evil Minions\u2122<\/sup> had promised for any direct aid.<\/p>\n

I’m not sure if this is working, as is noted at Calculated Risk<\/a>:<\/p>\n