The FED plans on keeping interest rates between 0 and .25% for a extended period of time.  As long as inflation is stable and unemployment fails to decline.  Capital comes from savings, the more savings we have the more capital we have and the lower the interest rates will be.  Vice versa the less savings you have the less capital you have and the higher the interest rates will be.  This is very important to the market.  When interest rates are low it tells investors that there is capital and they should invest.  But in reality there is very little real capital in America.  So when we have artificially low interest rates it gives investors the wrong impression and they are willing to make more risky investments then they normal world if real capital was low.  But you can't just lower interest rates on the whim.  In order to low them you need a increase in savings, but since savings are low the only way to do it is to print the money, or in the modern age enter a number in a computer.  So in order for the FED to low the interest rates so low and keep them low they have to keep increasing the money supply so they can loan it to people.  This creates the problem of inflation.  The more money you print the less purchasing power all the existing money has.  Inflation is a hidden tax on everyone.

What are you're thought on this?

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Nov. 4 (Bloomberg) -- The Federal Reserve repeated it will keep interest rates near zero for “an extended period” and specified for the first time that policy will stay unchanged as long as inflation expectations are stable and unemployment fails to decline.

“Businesses are still cutting back on fixed investment and staffing, though at a slower pace,” the Federal Open Market Committee said in a statement today. “Household spending appears to be expanding, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit,” the FOMC said after meeting in Washington.

Chairman Ben S. Bernanke is trying to determine when the recovery is strong enough to withdraw the $1 trillion the Fed injected to avert a depression. The dollar declined as the Fed’s statement, which followed a report last week showing the economy expanded last quarter for the first time in more than a year, signaled growth alone won’t be enough to warrant tighter policy.

Officials kept their benchmark overnight lending rate at between zero and 0.25 percent, where it has been since December. The conditions they cited to keep it there are “low rates of resource utilization, subdued inflation trends, and stable inflation expectations.”

“What they’re saying is the economy is improving, but it’s still entirely dependent on stimulus,” said Chris Low, chief economist at FTN Financial in New York, who doesn’t expect an interest-rate increase until next September. Fed officials are signaling that “The test for when rates have to go up, or stimulus has to be removed, ought to be inflation.”

Dollar Slides

The dollar slid as much as 1.2 percent, the biggest intraday decline since Sept. 8, before trading at $1.4876 per euro at 4:09 p.m. in New York, compared with $1.4724 yesterday. The Standard & Poor’s 500 Index was up 0.1 percent at 1,046.50 after rising as much as 1.5 percent.

Discussing inflation, the central bank said: “With substantial resource slack likely to continue to dampen cost pressures and with longer term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.”

Prices rose 1.3 percent for the 12-month period ending September, as measured by the personal consumption expenditures price index, minus food and energy, the Fed’s preferred gauge. Fed officials cited a 1.7 to 2 percent long-run goal for the overall index in June.

Core Inflation

“The Fed is focused on a very low core inflation number and is assuming that it is only going to get lower,” said Stephen Stanley, chief economist at RBS Securities Inc. “They are pretty worried about the low level of inflation and think they are on hold for a very long time.”

The difference in yield between 10-year inflation-protected Treasury notes and nominal Treasury notes is 212 basis points, indicating that investors see consumer prices rising by 2.12 percent per year over that time. In October, consumers anticipated inflation of 2.9 percent over the next five years, up from 2.8 percent in September, according to the University of Michigan’s consumer sentiment survey, released Oct. 30.

The Fed completed its $300 billion program of purchasing Treasuries last month. Today’s statement said the central bank will purchase a total of $1.25 trillion of agency mortgage- backed securities and “about $175 billion of agency debt” through the first quarter of next year.

“The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion is consistent with the recent path of purchases and reflects the limited availability of agency debt,” the statement said.

Australia, Israel

The ebb of the global crisis that caused $1.7 trillion in credit losses and writedowns has already helped spur central banks from Australia to Norway to start increasing borrowing costs. Today’s unanimous statement indicates the Fed isn’t yet ready to follow some of their counterparts abroad.

“We are nowhere near there,” Michael Holland, chairman of New York-based Holland & Co., which oversees more than $4 billion in assets, said on Bloomberg Television. “We don’t have anything approaching the position where they can start unwinding.”

Record-low interest rates and Fed purchases of Treasuries and mortgage debt, combined with the Obama administration’s $787 billion fiscal stimulus, helped boost gross domestic product 3.5 percent from July to September. Without the auto industry, which benefited from the government’s “cash for clunkers” program, growth would have been 1.9 percent.

Commodities Rally

Stocks and commodities have rallied as a stronger global economy encourages investors to take greater risks. The Standard and Poor’s 500 Index is up about 17 percent this year and crude oil prices are 80 percent higher. Gold has advanced 23 percent and touched a record of $1,096.20 an ounce in New York today.

Policy makers are “trying to add some sort of conditionality to their ability to include or exclude the ‘extended period’ language,” said Alan Ruskin, head of currency strategy at RBS Securities Inc. in Stamford, Connecticut.

While the return to growth has aided companies including Ford Motor Co., it has yet to pay off in jobs, with employers squeezing higher output from a smaller labor pool.

Ford, the only major U.S. automaker to avoid bankruptcy, beat forecasts and posted third-quarter net income of $997 million Nov. 2, its first operating profit since early 2008 on smaller discounts and higher sales.

Job Cuts

New Brunswick, New Jersey-based Johnson & Johnson said Nov. 3 it will shrink its 117,000-member workforce by 6 percent to 7 percent as it tries to cut costs and invest in more profitable areas of its business. Jabil Circuit Inc., a Florida-based electronics manufacturer whose customers include Nokia Oyj, said Sept. 29 it plans to cut an additional 1,500 positions.

“If employment losses don’t get down to a small level, we won’t have income growth to support consumer spending,” Kurt Karl, chief U.S. economist at Swiss RE Financial Products in New York, said before today’s Fed announcement.

The Labor Department on Nov. 6 will report that the unemployment rate rose to 9.9 percent in October, from 9.8 percent the previous month, as companies cut another 175,000 jobs, according to the median forecasts in Bloomberg News surveys of economists. More Americans filed bankruptcy in October than any month since changes to bankruptcy laws in 2005.

www.bloomberg.com/apps/news

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It's probably the best thing they can do. Historically pulling back the money supply to quickly can wreck a fragile recovery.

The problem is of course inflation, which is created by an increased money supply.

When inflation starts, they will have to start pulling the money back in, and you do that by raising rates.

It's very tricky, and so far no country in this situation has pulled it off without repercussions. What will happen is people will eventually start to borrow money as the economy recovers, and all this money sloshing around will start to cause inflation. Prices on goods  will go up as the dollar becomes worth less and less, because there are so many dollars.

So the only thing you can do is raise interest rates or you get hyperinflation with bread costing 20 dollars a loaf.

Because there is SO much money out there, to combat rampant inflation which will eventually set in, you'll need to raise rates to ridiculous heights, 10,12,14, maybe 20%. And then these huge interest rates cripple the economy, and we're right back where we started.

When Australia raised their rates a notch the stock market soared.

Lowering interest rates isn't something smart to do because of how this recession started in the first place.  Interest rates have been artificially low in the US for 15 years which has promoted spending and the loss of capital.  The large trade deficit and amount of debt racked up in the United States prevents the generation of capital.  This was the main cause of the recession, lack of capital to leverage as debt.  Without increasing capital through savings, there won't be a full recovery.

 Why don't we as america get rid of the Federal reserve!!!!    what is the purpose if we have the U.S treasury if they cant regulate the cash?  why do we pay the federal reserve  since they are not our government and their main hub is in England? why do we allow the federal reserve loan our money to other country's  they don't even know where money is at!! watch this video

www.youtube.com/watch     

 My thoughts on this? End the Fed.

I think when the fed is run by the right people it can be successful.  However, that means getting the right person.  Being appointed by the President and verified by Congress doesn't really breed best interests.

The purpose of the fed is so the US government does not have control of its own money supply.  If it did can you imagine how much money they would be printing for the greater good?  Its in Congresses best interest to lower interest rates and create inflation through printing.  Its the feds duty to make sure they don't do anything as foolishly detrimental as that.

Originally posted by EQTarbos

 Why don't we as america get rid of the Federal reserve!!!!    what is the purpose if we have the U.S treasury if they cant regulate the cash?  why do we pay the federal reserve  since they are not our government and their main hub is in England? why do we allow the federal reserve loan our money to other country's  they don't even know where money is at!! watch this video

www.youtube.com/watch     

Read this:

There are no aliens in Area 51. The twin towers on 9/11 were blown up by airplanes flown by crazy Muslims, not the US government, there are no Fema Camps in the US waiting to kill everyone like the Jews in Nazi death camps, yes there really was a Holocaust where millions of Jews died, and yes the US really did land on the Moon.

Originally posted by Cleffy

I think when the fed is run by the right people it can be successful.  However, that means getting the right person.  Being appointed by the President and verified by Congress doesn't really breed best interests.

The purpose of the fed is so the US government does not have control of its own money supply.  If it did can you imagine how much money they would be printing for the greater good?  Its in Congresses best interest to lower interest rates and create inflation through printing.  Its the feds duty to make sure they don't do anything as foolishly detrimental as that.

Article I, Section 8, Clause 5: The Congress shall have Power…To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

Article I, Section 10, Clause 1: No State shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

Amendment IX: The enumeration in the Consitution, of Certain rights, shall not be construed to deny or disparage others retained by the people.

Amendment X: The power not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

So Congress is prohibited by the Constitution to use anything other then Gold or Silver to be legal tender and that is what the US Treasury does.  The FED is a private cartel of banks that has been given a charter by government to operate.  The FED has the power to print money, but its is the job of the US Treasury to control the value of the dollar.  The irony in that.  The FED is the third Central Bank in Americas history.  The First and Second Central Banks closed down because the charter were allowed to expire.  Since the creation of the FED in 1913, inflation has hit around 2080%, what use to cost $20 in 1913 now costs around $430.  To make it easier its lost about 95% of its value.  The FED has caused great periods in economic instability since its creation.   The FED markets itself as being able to control inflation and market stability.  We have seen the stock market crashes of 1919, 1929,1930, 1937, 1973, 1987, 2000, and 2007.  Compared to only 2 major market crashed since before the creation of the FED, 1901 and 1906. 

So its not only is congress not allowed create a fiat currency (paper money) since its unconstitutional, the practicing of a fiat currency created many period of instability.  So the FED has been failing at its job since its creation and been proving that Keynesian Economics does not work.

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www.federalreserve.gov/aboutthefed/mission.htm

stocktaleslot.blogspot.com/2006/10/10-worst-stock-market-crashes-in-us.html

Here is something not being covered by the news nit wits.

Read this:

http://www.publiceye.org/conspire/flaherty/Federal_Reserve.html

There are no aliens in Area 51. The twin towers on 9/11 were blown up by airplanes flown by crazy Muslims, not the US government, there are no Fema Camps in the US waiting to kill everyone like the Jews in Nazi death camps, yes there really was a Holocaust where millions of Jews died, and yes the US really did land on the Moon.

 

Did i say anything about the crapp you talking about is not true or true?  

I was stating facts about the Federal reserve and how we should not use them. 

I am so happy to hear some many on these forums call out to "End the Fed".  You have no idea how happy that makes me :)  I hope more people come to realize what a parasite the Fed is on our economy, how we flourished when there wasn't one, and how the Fed's current monetary policy is going to ruin our currency and could cause hyperinflation if allowed to continue unabated.

Fed caused the Great Depression, Fed caused the stagflation 3 decades ago, and will cause another depression or more likely stagflation in our near future (next 1-5 years).

Ron Paul 2012? :)

http://campaignforliberty.com

http://auditthefed.com

As New Hampshire so eloquently says "Live Free or Die!"

<3

"... Congress could create just such a bank under the constitutional clause giving it all powers "necessary and proper" to the exercise of its specifically enumerated responsibilitiy."

Who said this?