US fed has cut discount rate half percent

[cuttlefish]

pump it

so what actually is the discount rate vs the fed funds rate?

 

[springhill]

Im no expert in global economics but doesnt this move just equate to short term gain leading to long term pain?

 

[cuttlefish]

yep - but the US fed is between a rock and a hard place - and they've chickened out and cut.

 

[reece55]

Im no expert in global economics but doesnt this move just equate to short term gain leading to long term pain?

Ding ding - you have hit it on the head springhill........

So watch for a bit of a rally and then dust of the short game........... It's like saying "Don't worry, we don't mind that you (the lenders) have completely screwed our global financial system by giving loans to people who couldn't afford it. We will reward you".

 

[theasxgorilla]

Seriously unbelievable. Do the words "not on my shift" sound appropriate? Cramer screamed at them over the TV, called one of their member a shame and they lose their nerve and do this. Hmmm.

 

[toothfairy]

Im no expert in global economics but doesnt this move just equate to short term gain leading to long term pain?

Wow, look like we Aussies are having some of the highest interest rates atm, just before the fed election. How would John & Peter explain this?
Oh yes, we are having some short term pain now for ah ah, long term gain when Labor takes over.

 

[insider]

Toothfairy...You caused this 0.5% cut from business discounts didn't you? It's only in your nature to leave surprises under stock brokers pillows

 

[reece55]

Seriously unbelievable. Do the words "not on my shift" sound appropriate? Cramer screamed at them over the TV, called one of their member a shame and they lose their nerve and do this. Hmmm.

Yeah ASX.G, it's a joke.......... It will just provide a buffer....

The reality is the US screwed the worlds financial system - when the last time you saw a AAA rated note have more than 10% of it's portfolio beyond 90 days!

Oh well, it will be something I can tell my grand kids! LOL.

 

[Captain G]

The Fed is in desperate fire control, where it will probably end up being a backburn go badly wrong!!

 

[toothfairy]

Toothfairy...You caused this 0.5% cut from business discounts didn't you? It's only in your nature to leave surprises under stock brokers pillows

Have no idea what you are talking about, I don't own & run any business & don't know / use any stock brokers. I am retired and use electronic share trading.

 

[springhill]

Wow, look like we Aussies are having some of the highest interest rates atm, just before the fed election. How would John & Peter explain this?
Oh yes, we are having some short term pain now for ah ah, long term gain when Labor takes over.

IMO we are suffering interest rate rises because people are pissing their money up against the wall and living outside their means, nothing more nothing less. We are the 'i want it now generation'; 4 by 2 house, new car, holidays, plasmas, alcohol, cigarettes, drugs. Nothing to do with 'senile' Johnny or 'two faced' Rudd. If people have borrowed more than they can afford, well as Mr T says 'meet my friend pain'. Who says 2moro never comes? 2moro comes when the bills are due

 

[Awesomandy]

Whoops... I can see economic confidence vaporising from the general public in a few days time, when they finally start thinking "we are probably in more trouble they we think".

In the meantime, it's probably not a bad thing for those who still happen to hold some long positions. It's a good opportunity to sell and brace.

 

[R0n1n]

lets not forget that the feds cut the discount rate and not the the key federal funds rate.

The discount rate is the interest rate charged to commercial banks on loans they receive from regional Federal Reserve . It differs from the key federal funds rate, which is the rate at which private institutions lend to other depository institutions overnight.

 

[sweeet]

Fed is still watching. the rate cuts just because of the OE day for August..

 

[brettc4]

I think the US have their banking system wrong which has had a helping hand in this liquidity crisis.

To me they have way too many small regional banks, all of them trying to make as much money as possible. How do you do that, lend as much money as possible. People don't match the lending criteria, change it, lend anyway, they don't make money when they are lending at discount rates to other banks.

So they lend out to anyone and everyone, to me this causes a couple of issues:
1. the take liquidity away form those institutions that may need it for what ever reason
2. They lend to the wrong people and bad debts go up.

This 50 basis points discount helps alleviate point 1 a bit as the banks can get their hands on money a little cheaper, but not a lot, but there will still be an increase in bad loans over the coming period.

Westpac went through bad debts, it took them a number of years but they came back, there is still plenty of pain to be had ahead.

 

[theasxgorilla]

IMO we are suffering interest rate rises because people are pissing their money up against the wall and living outside their means, nothing more nothing less.

To be honest, you can't blame regular people. There is some of what you describe going on in the world...but if you want to blame something/somebody for consumer indescretions, the finger ought to be pointed at the media and the psychological warfare advertisers wage. I went without a TV for two years and started watching again just before I left Australia and I was embarrassed by what I saw...WTF does Mark Taylor know about airconditioners anyway???

And regular people wanting 2 cars, a nice house, a holiday house, a boat, nice clothes, kids going to a good school etc. etc. is not actually wanting that much in a country as wealthy as the US or Australia. The problem is the fat cats who need 7 cars, 10-bedroom houses, great big f%¤k off yachts etc. Their consumption footprint could provide 10 familes of regular people with the modest wants I just mentioned.

When the social fabric of a country breaks and more and more people can't find the discipline to take care of themselves properly, and the country is as wealthy as Australia or the US, the only question to ask is, who the f%&k is in charge here??? Somewhere in Texas is a village without it's idiot...'nuff said.

 

[springhill]

To be honest, you can't blame regular people. There is some of what you describe going on in the world...but if you want to blame something/somebody for consumer indescretions, the finger ought to be pointed at the media and the psychological warfare advertisers wage.

And regular people wanting 2 cars, a nice house, a holiday house, a boat, nice clothes, kids going to a good school etc. etc. is not actually wanting that much in a country as wealthy as the US or Australia. The problem is the fat cats who need 7 cars, 10-bedroom houses, great big f% ¤k off yachts etc. Their consumption footprint could provide 10 familes of regular people with the modest wants I just mentioned.

I do love a good rant,but I cant argue with anything you have said here ASX G of course your everyday Joe Shmuck wants all these things, as i do too, all im saying is each one of us should be living within OUR OWN means, not running to the bank to keep up with the Jones'. As for advertising, although they do prey on peoples weaknesses, people still make the concious decision to drive their ass to the shop to purchase goods with money they dont have.

 

[toothfairy]

IMO we are suffering interest rate rises because people are pissing their money up against the wall and living outside their means, nothing more nothing less. We are the 'i want it now generation'; 4 by 2 house, new car, holidays, plasmas, alcohol, cigarettes, drugs. Nothing to do with 'senile' Johnny or 'two faced' Rudd. If people have borrowed more than they can afford, well as Mr T says 'meet my friend pain'. Who says 2moro never comes? 2moro comes when the bills are due

Lending out lots of money keeps banks in business which keeps the economy flowing.
Borrowing lots of money can well be for business expansion, even for personal use its up to the individuals. Plenty of people borrow to invest in stock market. Nothing wrong with that. $ can make $.
How much is too much is not up to you or me to judge for them. People have their own brains to figure out their comfort zone. What one person is comfortable in may be totally uncomfortable for you. Everyone knows what to do as they are free to choose ( as advocated by the late Milton Friedman).
The point I am making is I don't think Aussies are particularly extravagant in world standard yet we are paying relatively high rate in a country that has so so much minerals that other countries apparently need.

 

[dhukka]

Does anyone really think this move by the Fed solves the problems in the financial sector? Mortgage brokers, banks and hedge funds are still saddled with impaired MBS and CDO's that nobody wants. A short term to solution to some short term funding issues.

I hear dead cats bouncing.

 

[springhill]

Plenty of people borrow to invest in stock market. Nothing wrong with that. $ can make $.

......Until the :fan Then the borrowed $ that didnt make the $ has to be paid back, isnt that part of the problem we are in at the moment?