TIP OF THE WEEK: The Federal Reserve Is Not Holding Down the FED Funds Rate, But I Know Who Is.

Therefore, they don’t need to make overnight loans to one another to satisfy the legal reserve requirements. These bankers are scared to make loans in this horrible economic environment.  I don’t blame them for being scared.  They have decided to park the money back at the FED and the FED is paying them 0.25% interest to store it for them.  This has caused the federal funds effective rate to drop to 0%. 

Image002

The FED could get the banks to lend the $1.5 trillion dollars into the economy by imposing a fee on excess reserves.  But that would create hyperinflation in the money supply and prices would rise over 100% in a few months.  The FED doesn’t want that to happen, so they pretend to be in control of the federal funds effective rate when the terrified bankers really are.  The bottom line is that there will be no economic recovery until bankers increase their lending.  That means we will experience a double-dip recession regardless of what happens in Europe or China.  I’m waiting for much lower stock prices to buy high dividend stocks with earning power and strong balance sheets.

For more tips, go here:

http://www.myhighdividendstocks.com/category/tip-of-the-week

Advertisements
Published in: on February 10, 2012 at 5:01 pm  Leave a Comment  

The URI to TrackBack this entry is: https://myhighdividendstocks.wordpress.com/2012/02/10/tip-of-the-week-the-federal-reserve-is-not-holding-down-the-fed-funds-rate-but-i-know-who-is/trackback/

RSS feed for comments on this post.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: