What are the Dangers of Cutting Rates too Early?

Discussion in 'Stock Market' started by The Banker, Aug 24, 2019.

  1. The Banker
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    The Banker VIP Member

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    I think the FED should just cut again in Sept in order to try and "stay ahead" of our weakening economy. If you wait too long and the economy cracks then a rate cut won't do much to stave of a recession.

    BUT there is only so much a rate cut will do. Multiple rate cut won't do much IMO because if the economy is going to crack then it's going to crack and a 1 pt cut or more won't do much to help. They should cut in Sept and see how that helps.

    I really don't see much risk in cutting because they can always just raise again and inflation is not a problem. The only risk is going into a bubble, which I am also ok with.

    The grand risk is that Trump will use all our stimulus bullets and turn us into Japan or the Eurozone (Japan has had zero rates for 20 years... stimulus does little over there, and the Eurozone had neg bond yields. Stimulus isn't doing much there)

    Trump has already run up deficits to unprecedented levels, scary levels, levels that pose a real threat to the future of our country. The worry is that Trump will panic, use all our stimulus, and turn us into Europe or Japan, and then China will have beaten us. Now we see why Trump has declared bankruptcy so many times, something tells me Trump's daddy won't be able to bailout the US government the way he bailed out Donald.

    I think the FED will cut in Sept but if they don't markets are going to dump badly.
     
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  2. The Banker
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    The Banker VIP Member

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    On a side note the FED keeps say "It's hard to predict the uncertainties of this trade war" or some crap like that.

    No it's not. The trade war is going to continue to escalate so plan appropriately. It seems the FED has a hard time understanding this.
     
  3. Mac1958
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    Mac1958 Diamond Member

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    I keep seeing here and there that there is doubt in the financial markets that the Fed has the pull it once had. That said, Fed rate cuts in non-recessionary periods have a good track record.

    The issue now, as much as anything else, is psychology. "The markets" are damn well expecting at least 25bps, and it might need to be 50bps to placate them. But it seems like every time we get our feet under us, the trade situation gets worse and down we go.

    We may need both rate cuts and a good trade deal. If China is holding out for the 2020 elections (which is my guess), rate cuts may not be enough and we could see some problems soon.
    .
     
  4. Toro
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    Toro Diamond Member

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    There is no model what to do in a trade war. Powell said so in his press conference.

    The Fed cutting rates will only have a marginal effect. The trade war is much more important.

    The problem is not borrowing. Credit is easy and rates are already low.
     
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  5. Toro
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    Toro Diamond Member

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    It's absolute nonsense that the stock market has the Fed by the short hairs. They've put themselves in the position of getting the market addicted to easy money like a heroin addict. Take the market's hit away, and it goes into violent withdrawal. But it is what it is.

    The Fed cutting rates may lower the discount rate a little more, but it doesn't offset the damage to the volatile policy and the President who is acting like a toddler throwing his toys out of the crib when he doesn't get his way. How can businesses plan when they don't know what their costs are going to be due solely to the President?
     
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  6. Olde Europe
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    Olde Europe Diamond Member

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    Let me put this as kindly as I possibly can: Shit on the "markets".

    I want bankers driving Toyotas, or rather bicycles. I want the real economy separated as much as possible from that casino-capitalist swamp, and then I want it drained until it turns into a boring desert, with no one voluntarily seeking employment there.

    I want money flows re-directed into the infrastructure of the 21st century, into improving living conditions, into lifting the lot of the bottom 50%, and I want 95% of the country's profits generated from these endeavors. I want every single dollar of casino profit taxed at 90%. That's how to emasculate the plutocrats, and how to save the Republic from their iron grip.

    Oh, and I want the bankers' public reputation to be right next to those of pimps and used-car salesmen, where it rightly belongs. If the Fed were to contribute to that in any way, shape, or form, I'd agree it is of some use.
     
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  7. Mac1958
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    Mac1958 Diamond Member

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    These are uncharted fucking waters, that's for sure.
    .
     
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  8. Toddsterpatriot
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    Toddsterpatriot Diamond Member

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    The grand risk is that Trump will use all our stimulus bullets and turn us into Japan or the Eurozone (Japan has had zero rates for 20 years... stimulus does little over there, and the Eurozone had neg bond yields. Stimulus isn't doing much there)

    None of their stimulus ever included permanent tax cuts.
    We're not following their path.
     
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  9. ZZ PUPPS
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    ZZ PUPPS Platinum Member

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    Those tax cuts are only permanent until the RaTz say they're not.
     
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  10. Manonthestreet
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    Manonthestreet Platinum Member Gold Supporting Member Supporting Member

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    Just stop.....
     

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