William Poole Opposes Interest Rate Cuts Despite Current ‘Calamity’

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Only a calamity would justify an interest-rate cut now, says St. Louis Federal Reserve chief William Poole.

In which case, he either liquidated his personal stock investments before June…or the guy’s got some real hide.

“The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by major brokers,” says the New York Fed. And as you can, it’s slipped sharply below target…closer to the current yield on 10-year Treasuries, in fact.

So why does the US central bank insist in lending fresh cash to the money markets through its open-market operations? The Fed’s put in US$76 billion over the last week, ostensibly to keep the Fed funds rate on target by making money more readily available.

Some US$24 billion of that liquidity was still outstanding yesterday morning, with the latest US$5 billion being auctioned for a repurchase agreement just ahead of today’s open.

Does that make it a calamity yet?

Adrian Ash
for The Daily Reckoning Australia

Editor’s Note: City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of Gold research at BullionVault – where you can buy gold today vaulted in Zurich.

Adrian Ash
City correspondent for The Daily Reckoning in London and formerly head of editorial at Fleet Street Publications Ltd, Adrian Ash has been studying and writing about the investment markets for the last 9 years. He is now head of research at BullionVault - giving you direct access to investment gold, vaulted in Zurich, on US$3 spreads and 0.8% dealing fees.
Adrian Ash

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2 Comments on "William Poole Opposes Interest Rate Cuts Despite Current ‘Calamity’"

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John Médaille
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I’m not sure what all that means, especially phrases like, “US$24 billion of that liquidity was still outstanding yesterday morning, with the latest US$5 billion being auctioned for a repurchase agreement just ahead of today’s open.” However, one thing in particular worries me. The Fed is accepting mortgages as collateral for these loans. What is to prevent the banks from taking their worst mortgages and sticking them to the Fed? Or is there something here I don’t understand? Further, there is a problem in valuing these loans. So how is the Fed valuing them, or are they just taking the… Read more »
Coffee Addict
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Question: Who pays for all the new cheap money ?

Answer: Taxpayers

Ideology: Privatisation of the profits + socialisation of the losses.

Likely result: Short term bail out of poor money managers. Further devaluation of $US. Long term inflation and recession.

wpDiscuz
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