Even Easier Money on the Way


Central bank policymakers conclude a two-day meeting, with their decision on interest rates expected at 2:15 p.m. ET.

Economists believe the Fed to lower its benchmark funds rate to 0.5%, which would be the lowest level on record, from its current level of 1%.

"The Fed is going to throw everything they have to not only reverse market psychology, but reverse the downward decline in economic activity," said Peter Cardillo, analyst for Avalon Partners.

More here. Twas easy money that got us into this mess, say the experts, and it'll be even easier money that gets us out:

We've lived through an era of easy money, in which we were allowed and even encouraged to spend without limits; to borrow instead of save….

Once we get past the present emergency, which requires immediate new investments, we have to break that cycle of debt.

More here. Any sort of short-term stimulation has given way to something like high-voltage massage, and a huge chunk of that is still in the pipeline (hold out until January 20 or so).

Our long national nightmare of inflationary pressures, unemployment, and nationalization of key industries is just starting. In the meantime, transfer those credit card balances to 0 percent cards for as long as possible.

Update: Via Bloomberg comes this story outlining the Fed's strategery, including a fight within the organization itself:

The Fed's Open Market Committee will probably cut the benchmark rate in half, to 0.5 percent, according to the median of 84 forecasts in a Bloomberg News survey. The central bank may also signal plans to channel credit to businesses and consumers by further enlarging its $2.26 trillion of assets….

Fed policy makers disagree over the primary cause of the credit freeze. Central bank plans to buy $200 billion in consumer and small business loans and $600 billion in mortgage-backed securities suggest they consider rates remain high on home loans and credit cards because banks are unwilling to lend….

"My reading of current conditions is that bank lending is constrained more now by the supply of creditworthy borrowers than by the supply of bank capital," [Richmond Fed head Jeffrey] Lacker said in his [November 19] speech at the Cato Institute in Washington.

More here.