Fed considers new steps to bolster U.S. economy

[Guest guest]

http://www.theglobeandmail.com/report-on-business/economy/fed-considers-new-step\

s-to-bolster-us-economy/article1639952/

Fed considers new steps to bolster U.S. economy

Jeannine Aversa

Washington — The Associated Press

Published on Wednesday, Jul. 14, 2010 2:05PM EDT

Last updated on Wednesday, Jul. 14, 2010 2:23PM EDT

U.S. Federal Reserve officials at their June meeting weighed whether new steps

would be needed to keep the economic recovery alive.

A new document, released Wednesday, also revealed that Fed policy makers lowered

their forecasts for economic growth this year in light of Europe's debt crisis,

a volatile Wall Street, a stalled housing market and high unemployment.

With risks now growing, Fed officials at their June 22-23 meeting saw the need

to explore new options for bolstering the economy. That's a turnaround from

earlier this year when they were moving to wind down crisis-era supports.

No new specific steps were disclosed or agreed upon.

In the end, Fed chairman Ben Bernanke and his colleagues agreed to hold a key

interest rate at a record low near zero to help energize the economy. And they

repeated a pledge to keep rates there for an " extended period. "

At that time, Fed policy makers said they didn't think the slowing in the

economy seen thus far warranted new stimulative actions besides those already in

place, according to the minutes of the June meeting.

However, Fed officials said the central bank " would need to consider whether

further policy stimulus might become appropriate if the outlook were to worsen

appreciably, " the document stated.

Fed officials concluded that the " economic outlook had softened somewhat. " And a

number of members saw " risks to the outlook as having shifted to the downside. "

Mr. Bernanke has publicly played down the odds of the economy sliding back into

a " double-dip " recession. He will provide lawmakers in Congress with a fresh

economic outlook in back-to-back appearances on Capitol Hill in Washington next

week.

Economists predict the Fed will keep the key rate at record low well into next

year and possibly into 2012. The Fed has leeway to hold it at a record low

because inflation isn't a threat to the economy.

In fact, the minutes said that a few Fed officials worried about the risk of

deflation. That's a widespread and destabilizing fall in prices of goods, prices

of homes and stocks, and a drop in wages. The country's last serious bout with

deflation was in the 1930s. Keeping interest rates at record lows would help

combat any deflationary pressures.

If the U.S. recovery were to flash worrisome signs of a relapse, the Fed would

likely take other steps to get it back on course. It's next regularly scheduled

meeting is Aug. 10.

The Fed has left the door open to resume purchases of mortgage securities. It

ended a $1.25-trillion (U.S.) mortgage-buying program in March, an initiative

credited with driving down mortgage rates and bolstering the housing market

earlier this year. However, some question how much of an economic benefit would

come from reviving the program now. Mortgages rates are already at record lows

but that has failed to energize sales and home re-financings.

A less likely move would be for the Fed to resume buying Treasury securities, a

step it took during the crisis. Critics on Capitol Hill and elsewhere alleged

the Fed was doing this to bankroll the federal government's record high

deficits. The Fed said its government-debt buying program was aimed at lowering

a range of rates to help revive the economy.

The Fed could cut its emergency lending rate to commercial banks, now at 0.75

per cent. That rate was bumped up in February, when the Fed was started to raise

the rate closer to normal. Still, the rate is considered low, and banks have

scaled back on their use of the emergency Fed loans.

[Guest guest]

(Email still not working worth a darn so I'll probably visit the site itself later to catch up.)

If they do it is a sign of one of two things, or maybe a combination of the two.

1. The people at the Fed are incompetent and in way over their heads. They clearly don't learn from history and are incapable of looking at the debt levels and actual economic projections and seeing the harm they are doing and that we will never be able to pay that money back.

2. There is seriously malign intent behind this. Take your prick of conspiracy theories, but the general theme is a small gang of wealthy people trying to rule the world through the banks. With the banks they can pull the strings of the political power seekers and make the masses dance to their tune, or be cut off.

I'm there is a lot of both going on right now. I'm all for a forced audit of the Fed and for disbanding it completely, not giving it more power and control as we are in fact doing. Central banks have never been good for any nation. Take away the big bank and it will be harder for the elites to do as they will. Add in tougher bank regulation and force their enforcement, then things will be better still.

In a message dated 7/14/2010 2:43:48 P.M. Eastern Daylight Time, no_reply writes:

Fed considers new steps to bolster U.S. economy