Stearns County, Minnesota | Here is a view from someone that was in business through the 70's and 80's. My understanding of the Federal Reserve Bank purpose, is to keep the banking system in this country healthy. There evidently are big problems with the health of some of the big banks in this country, due to the sub-prime lending. It seems to me that what they are doing is trying to prevent the equity from being pulled out of these banks. By lowering their interest rates, a person or corporation has no real good place to earn a sufficient return on his money, if he take his equity out of these banks. (Some of this equity may have gone over to the commodity markets already.) In the 70's and early 80's the banking system was not the problem, but in the 30's the banking system was the problem. (The Savings and Loan Banks, in the eighties, started having problems and it created a crisis in this type of banking after the "Fed" raised interest rates.) The banking system went in the tank, so to speak, in the 30's, and this could happen again with the sub-prime lending crisis. This is what the Federal Reserve is trying to prevent from happening and is their goal, even though it may cause inflation. Once the Federal Reserve decides this crisis with the banking system is corrected, it will look at fighting inflation. Really their only tool is higher interest rates to fight inflation.
Edited by 99MAX 1/26/2008 12:21
|
early 80s and high interest rates, how and why did this happen
