Soo the Fed Keeps Cutting Rates... But Then What?

8 Replies

The fed keeps cutting rates in an attempt to keep the economy from going into recession. It's inevitable, at some point we ARE going to have a recession. What weapons do they have to boost the economy if the rates have already been cut to zero?
Negative interest rates??

I think they are cutting rates to stimulate the borrowing to fuel the economy further (keeping campaign promises--more jobs, more personal spendable income, etc...) vs. to keep it from sliding backwards.

(Beware of media lies)

Just my 2 cents.

Not many after that. They could end the trade wars, they could offer new tax credits (like the first time home buyers act back in the last one) but pretty much every time the government steps in to the knife fight, they bring a rocket launcher and F things up even more. Time will tell.

The Fed may very well try negative interest rates, but they will never trickle down to mortgage rates. There will always be a risk premium added to the rates. Mortgage rates may go as low as 2 - 2.5%. If they do go that low, lenders will tighten their loan requirements and only those with very high credit scores will qualify. 

I remember 2008 quite well but at least back then we had the option to cut rates. Of course no one knows for sure but I think this next one may be worse then 08.  No doubt it will be an interesting time to be an investor if you have cash and are nimble.

I was listening to The Real Estate Guys Podcast from 2 weeks ago and they seemed pretty worked up about some treasuries going no bid so the
fed had to step in and buy them for a few days. They're far smarter at that then me so hearing them get worked up over it kind of got me intrigued.

Bulls make money. Bears make money. Pigs get slaughtered lol

Not sure if I would worry about a recession.  Just saw this on Trading Economics:

"The US unemployment rate decreased to 3.5 percent in September 2019 from
3.7 percent in the previous month and above below market expectations of
3.7 percent. The last time the rate was this low was in December 1969."

Also, companies are reporting strong earnings.  We could see a market adjustment in the near future, but I don't think anything like in 08'.  

I think part of the confusion, which was brought up in the Real Estate Guys podcast mentioned above, is that what seems to be in trouble is the underlying financial system itself, not the economy.  While the economy may be slowing a little, recent data suggests it is still going strong as a whole.  But there are some interesting and eerie things going on in the national and international markets that suggests something bigger is going on that nobody can quite put their finger on.  Even the Fed seems concerned and unsure what to do, hence the drastic measures they are taking to try and stimulate things.  They only have so many tricks up their sleeve, but what happens when their tricks no longer work?  

If you look into economic cycles you will see there is a short term cycle (5-7 years~) and a long time cycle(50 to 100 years~). The long term cycle and big recessions/depressions can happen for the very reason you mention. The government runs out of tools to tweak the economy.

So what does the future hold a recession of a major financial collapse, perhaps worldwide. When will it happen - no one knows. Am I worried - no, there will be opportunities. Well run businesses will adapt and survive. Some will find hidden opportunities and thrive.

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