Feds cuts interest rate by half a percentage point, as U. S. House passes bill to have government back mortgages.
Twin economic news announced just now. First, the Federal Reserve Board has lowered the prime rate -- the interest that the Feds charge banks and other lending institutions to borrow money/credit -- by an unexpected half a percentage point. This move is expected to help a sluggish economy, particularly in the turbulent mortgage market -- to rebound.
Talking about the mortgage market, the U. S. House of Representatives has just now (in a breaking news fashion) overwhelmingly passed a bill to have the federal government back mortgages. It remains to be seen whether the Senate will also back it, though I think it could be a good idea IF the feds will be EFFECTIVE (a kind of oxymoron) in policing the program.
Talking about the mortgage market, the U. S. House of Representatives has just now (in a breaking news fashion) overwhelmingly passed a bill to have the federal government back mortgages. It remains to be seen whether the Senate will also back it, though I think it could be a good idea IF the feds will be EFFECTIVE (a kind of oxymoron) in policing the program.
Labels: Economic news, Fiscal responsibility, Political economics
posted by KYJurisDoctor at 2:41 PM
3 Comments:
Phase out the "policing" authority of the Fed, and bring back the gold standard!
nich. con: can you explain what difference the gold standard will make?
I'm in way over my head on that, Osi, since I'm not an economist. But the Fed has always used various gimmickry such as interest rate hikes and cuts, printing of dollars, financing of debt and manipulating the bond market to control our money supply in a haphazard manner. Non-constructive (i.e., not self-correcting in a supply/demand sense) inflation and recession have been the perpetual result.
Gold has been the most stable commodity throughout history from a price valuation standpoint. We need to tie our dollar to the price of that most stable commodity in order that it, too, will be stable. If borrowers and lenders were tied to a stricter monetary supply discipline, the risk of making bad loans in the first place would be prohibitive.
I'm sure an expert out there somewhere could easily point out where I'm combining dissimilar things, etc into an overly-simplistic view.
I'm also aware this is an issue that ultimately goes even deeper than the existence of the Fed, and there are advocates of abolition of all central banking, such as Andrew Jackson's program. That sounds extreme or unworkable even to me, but I need to better understand the arguments on both sides.
I think I'm safe on the point that Nixon took us off the last vestiges of any ties to gold convertibility, but we had long left a true "gold standard" in the dust.
BTW, the "Austrian school" economist Murray Rothbard wrote the best book explaining the Great Depression I've ever seen. I wish I had a copy; I checked it out of a university library years ago.
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