General Question

mirza's avatar

Based on current data, would you lower the interest rates?

Asked by mirza (5042points) February 6th, 2008

Based on current data (GDP,CPI, unemployment rates) would you lower the interest rates? What do you think about the sate of the economy?

PS. please do not answer if you do not have any understanding of economics (and no Ron Paul policies)

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16 Answers

Charlie's avatar

The interest rate is set by the Federal Reserve Members and is based on the supply and demand of Federal Reserve Notes on hand, in this cases the differance between the DEBT and CREDIT in Their books. Lowering the interest rate by just a few points isn’t going to hurt them when you consider the Billions of Credit ($) they get a month. In the same case, it isn’t going to help US either unless you have a loan or are getting one. Be sure that they are a “FIXED” interest rate.
As for the economy, it hasn’t been this bad since the days of the Depression. There is no way “They” can count the people that are unemployed so the only numbers you get are of the ones still are able to draw unemployment. When you consider that everything is made in China and you have 16M known illegal imagrants here in this country and you put it together, where are the jobs?? Without those jobs, Where is the economy? All We are doing is passing the buck around with the only ones getting any thing is the polititians, Bankers, and the Free-loaders. It is sad to realize that our economy is based on thin air, gambleing houses and services or infrastructure works.
Until WE demand that importing goods are stopped This country will be in a DEpression real bad in just a few more years and CHINA is still a Communist country that WE are makeing rich (along with the Big money boys and the Politicians)!
Read the archives in
Hope this helps

glial's avatar

I think that the recent lowering of rates was a little excessive. I understand the promotion of spending, however, I worry that this will spur inflation. With the lowering of the rates, I have seen housing prices in this area move up a small amount, which in my opinion, defeats the purpose.

Lastly, I don’t think the economy is anywhere close to being as bad as the great depression. In fact, I don’t think it is as bad as the period following 9/11.

hossman's avatar

One of the hidden causes of the economic slowdown is the new relative inability of consumers to incur additional consumer debt.

The recent bankruptcy reforms prevent some consumers from discharging their consumer debts and starting to incur new debt. A significant number of additional consumers only THINK they can’t do a bankruptcy under the new laws, having been scared off by the ignorant coverage by the media in the last few years.

The drop in housing sales and prices, and the contracting of mortgage lending has resulted in consumers no longer being able to run up their consumer debt and use their home equity as an ATM to pay off their credit card balances so they can incur new consumer debt.

Recent changes in federal law have now required credit card companies to increase the minimum monthly payment on their accounts, as a result, consumers have had to increase the portion of their budget paid to their credit cards. With increases in adjustable rate loans and increased gas prices, what little room existed in their budgets is now gone.

The good news is these restrictions seem to actually be resulting in many consumers decreasing their consumer debt and unnecessary consumer spending. The bad news is the decreased consumer spending and decreased consumer confidence means diminished sales and job losses.

Whether this is a net gain or loss in the long run depends on your viewpoint. What is important is finally even the mildest brakes are being applied to consumer spending and debt. There is absolutely no reason the barely employed should have 52” flat screen TVs and $50K SUV’s, but many do, and our economy has relied on the bubble of overexuberant spending for quite some time. It is important that we make some effort to spend within our means and accept reasonable deferment of our need for frequent spending “fixes.” Further, we cannot expect business and politics to believe we are serious about wanting reduced government spending, or that we won’t spend $5 a gallon on gas, etc., so long as we are spending $5 for a cup of coffee twice a day.

vanguardian's avatar

Real Estate wise…the boom should have been controlled better. By raising rates a couple years ago. The housing market needed an adjustment and it is almost time to level off. The problem is so many people are upside down on their loans that bankrupcy rates are rising. Rates should stay put for a little longer. We have been seeing that lowering the rates is not really stimulating the market. Just like the stock market, it goes up and down. The difference is historically real estate doesn’t rise any where near as fast as it goes down

Unemployment numbers aren’t as bad some would indicate.

I know the powers to be are drafting stimulus packages towards tax rebates for illegal immigrants. But that’s about all they’re doing.

The economy is lower but steady in my opinion. I tend to think of it as how rangers intentionally burn forests to create new growth.

Exxon/Mobil had a record profit year in 07. Something like 44billion. The most out of any US company ever. So that kind of cracks me, but thats a different discussion.

ketoneus's avatar

The traditional role of a central bank like the Federal Reserve is to control inflation. The rise in oil prices has trickled down into other consumer products, driving some of the highest rates of inflation seen in years. This inflation, along with the increased payments to credit cards and other tightening of credit so aptly described by hossman has caused consumers to tighten their belts and spend less. Such decreased consumer spending often results in business cutting back on the payrolls, typically hitting the lower rungs of the workforce the hardest.

By lowering the interest rate, the Fed is essentially releasing more money into the economy, which itself usually results in inflation. More money is available to spend, even though because of the consumer cutbacks mentioned above, many businesses have cut back on their production, resulting in a reduced supply. The law of demand dictates that this influx of cash into an economy where supplies of goods is reduced will result in higher prices being paid for those goods. The good news is that this higher price will eventually spur more production, resulting in more jobs. However, the prices are very unlikely to fall back to their point before the depression.

So should the Fed have reduced interest rates? I don’t think so. I think the current recession (or whatever you want to call it) is a needed, albeit painful, correction for our economy and it should be allowed to run its course.

hossman's avatar

A lot of Exxon/Mobil’s profit is not coming directly from gas sales, but use of their credit cards for all sorts of consumer purchases.

drive_by_dev's avatar

I would not lower rates. The current lowering trends seem overly reactionary in my opinion. That is not to say some adjustment was not needed, or that future movement will not be needed in the relative short-run. It appears as though Wall Street is indirectly dictating the emergency rate cuts which, if true, is poor methodology. The impact of rate changes cannot even be determined if you make another change right away, indicators just do not work that way. Someone needs to talk to Smith’s hand if they think they can control an economy on a day to day basis (sorry, could not resist).

Charlie's avatar

Did anyone know that the Citco gas stations and citibank is owned by a president of a South American country ? Lets get real hear. All a Bank wants is to make money off you one way or another so there is no need to talk fancy about lowering interest rates, ETC., because anyway you look at it, They come out ahead and you are the looser.

vanguardian's avatar

So the government is creating tax rebates. I guess they voted on it today. I think it’s primarily for low income & the elderly.

ketoneus's avatar

@vanguardian: Here’s what I’m reading about the tax rebate from CNN:

“The package, which passed the Senate 81–16, will send rebate checks to 130 million Americans in amounts of $300 to $600 for people who have an income between $3,000 and $75,000, plus $300 per child. Couples earning up to $150,000 would get $1,200.”

Since when is $75,000 for an individual or $150,000 for a couple “low income?”

Charlie's avatar

The way I understand it is that if you make alot of money you will get about $1500FRN’s but if you are poor you MIGHT get 300FRN’S. The rich always helps the rich and the rest of us just gets whats left over as usual. I don’t know about the unemployed because the only way the can tell who is unemplyed is by the one’s drawing it. They don“t know who hasn’t got a job and by the looks of the economy, there iare alot of folks that are getting very close to being flat broke. I saw tonight where this company is a mediator for people that is haveing a problem with their house payments. Normal calls per day has been around 200 BUT now it is up to nearly 5000 per day. Would $300 or $1500 help them? No way! The people in DC have NO idea, Nor care what Low income is.

hossman's avatar

Many of my high school students who work summer or part-time jobs are looking forward to blowing that $600 check. Is this a wise use of our tax priorities? Are these the “poor” Charlie feels need such help? Further, these “rebate” checks are not rebates. A rebate implies people are getting a discount from the taxes they paid. If you are a part-time worker making $3,000, you didn’t pay any net taxes to begin with, and now you’re getting a check for an additional 10% bonus on your gross income. That’s just income redistribution, not a rebate or refund. But if you are a couple earning $150,000, you get $1,200 back, less than 1% of your gross income, and you probably paid quite a bit more than that in taxes. If you actually do the math, Charlie, this “rebate” greatly favors lower incomes. You should do the math before you begin reflexively complaining.

I have a much better idea, rather than “rebates,” permit every employer to withhold 10% less in taxes from each paycheck, and reduce the tax burden of every person WHO ACTUALLY PAYS TAXES (as many of the people Charlie labels as low income are not taxpayers, as they pay no taxes, but rather are subsidized by the taxpayers, how much is withheld has nothing to do with how much is paid). Why have the money go through the system at all if it is going back to taxpayers?

Charlie's avatar

Bossman, I will not argue your point but the whole thing comes down to one thing, WHY did you pay a tax on FEDERAL RESERVE NOTES that you got for your work or labor when the only thing that is taxable is PROFIT or INCOME, NOT IOU’s. I don’t care if this criminal government sends me anything because whose $$$$ money is it anyway? It was those people that is going to give you this “Stuff” that allowed this country (the Big money boys) to send all the jobs to another country, that actually imported all the illegal immagrents and to make the so called “money” we use nearly worthless! Did you know that the so called IRS “Income Tax” that you may pay never goes to the government? That is a sure-charge for useing the bills or fake coins put out by the Federal Reserve System as money. No less. I have a copy of the Article of Incorporation for the IRS. It is a PRIVATE BANKING BUSINESS!! It has nothing to do with our government and people are too stupid to read the writting on the wall. Go read the archives at or AOL’s research and learn.
Besides that, how can a BROKE government give US money back? Becareful of this cause there is going to be a catch here some place. I have never seen people in OUR government ever do anything for the people other then make the rich richer and the poor poorer. If you get your poor butt out of bed to go to work every day and pay the IRS to do it give me a clue as where is the PROFIT or INCOME. People today live from hand to mouth and the LAW says anything that is profit or income is taxable. Does that include the FRN’s that you get to stuff your face with FOOD? It is a volentary system, WHY? I could go on and on with this but most people won’t read the Law and are too gutless to stand up and say NO WAY. Read the Constitution of the United States. If you pay a tax and fill out a 1040 form, you are a liar and are a danger to the Freedom of this country because you are ignorant of the LAW. Don’t take my word for it. I beg you to go look, check it out. I quit putting up with the IRS and this Criminal government back in 1984. I did it LEGALLY.
Hope this you some insight

ketoneus's avatar

Isn’t it great that taxes buy things like computers and Internet access in public libraries so that people of questionable sanity can spew ridiculous conspiracy theories?

Charlie's avatar

Yeah I know but most people never know they are dead until it is over. In other words, Most people have been so brainwashed that if you show them the truth they can’t beleive it because of the lies they have grown up with as thruths. Read the US Constitution.

Charlie's avatar

Yeah and the ONLY way anyone gets anything is if you file an income tax form with the IRS, that is if you make any REAL $$$$ to file in the first place. I’m on Social Security and DON“T make enogh to file ( and wouldn’t file anyway) so out of this, I will get nothing!!! Along with a bunch of other people that are retired yet Polosi wants to start TAXING 401k’s and other retirement benefits. Yep, IT“S a rip off, AGAIN.

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