On Fri, 10 Jun 2005 15:26:18 -0700, Frank Gilliland
wrote:

Greenspan chopped the prime rate after Bush's tax "rebates" because
the expected revenue wasn't coming back -- instead of spending that
money people were paying down their credit cards. So the Fed dropped
the prime rate to encourage people to borrow and spend -more- money.
IOW, the Fed was bailing out the economy after Bush ****ed it up.
++++++++++++++

Actually the Federal Reserve chopped the Federal Funds Rate during
2000 to 2003 period. This in turned caused banks to lower the prime
rate.

The process of controlling the Fed Rates is to pump in or take out
liquidity in the markets. Lower rates in a recession to stave off
defaltion. Raise rates when teh economy starts to heat up to controll
inflation. The Federal Reserve was very scared in 2000 that the US
would follow Japan. The consumer stimulation in the economy was
purposely done so that Deflation and Fed Rates would not fall below
1%. During Japan's deepest deflation period of 1997 to 2000 their
Central Bank rated never got abor 0.5%. The lower rate was as low
0.01%. The Japan Central Bank at times was literally giveing money
away and few one were taking then up on their offer.

One can debate the merits of teh Fed's move on money policy over the
past five yrs. In doing so you must consider which of the two evils in
worse? Between two and three yrs of deflation or four to five yrs of
stagnation? The Fed took the road of Stagnation considering the
wholesale lack of control on the part of Government to curtail
spending. Funny how the Republicans always criticized the Democrats on
their spending habits! I thought Republicans were supposed to fiscal
responsible? They spend money just as fast if not faster than
democrats.

james