U.S. FEDERAL RESERVE EMERGENCY INTERVENTION
August 17th, 2007Just a couple of hours before this news broke, I wrote:
Cheap yen have been greasing the rails for years now. With that stuff going home…
The three words that came to my mind were: global liquidity crisis
But maybe not. There are lots of black ops bankers out there with who-knows-what funny money mechanisms up their sleeves. But it’s going to get weird. And if it doesn’t get weird enough, it’s going to get bloody.
Almost certainly, it will get weird and bloody.
So, for now, we’ve got weird.
Via: AP:
The Federal Reserve, declaring that increased economic uncertainty poses risks for U.S. business growth, announced Friday that it has approved a half-percentage point cut in its discount rate on loans to banks.
The action was the most dramatic effort yet by the central bank to restore calm to global financial markets which have been roiled in the past week by a widening credit crisis.
The decision means that the discount rate, the interest rate that the Fed charges to make direct loans to banks will be lowered to 5.75 percent, down from 6.25 percent.
The Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year.
However, it has been infusing billions of dollars in money into the banking system over the past week to keep that rate from rising above the target level.
In premarket trading, U.S. stock futures reversed previous declines after the Fed’s announcement.
Many economists believe if the financial market crisis worsens the Fed will soon move to cut the federal funds rate as well.
