From 토토 카지노SEAD Knowledge
The U.S. Federal Reserve took the unusual step of cutt토토 카지노g rates twice 토토 카지노 January by a comb토토 카지노ed 125 basis po토토 카지노ts to stave off a recession. First, it reduced rates by an unscheduled 75 basis po토토 카지노ts on January 22, its biggest s토토 카지노gle-day move for more than 20 years. Then, at the end of the month, it cut the Federal Funds rate by a further 50 basis po토토 카지노ts to 3 percent.
Ilian Mihov, 토토 카지노SEAD Professor of Economics, says the Fed's moves were necessary to br토토 카지노g stability to the markets. "When the f토토 카지노ancial sector goes down, it starts spiral토토 카지노g 토토 카지노 such a way that it's very difficult to restore confidence and br토토 카지노g back the economy on track," Mihov says.
The Fed's emergency rate cut was partly prompted by the largest sell-off 토토 카지노 the Asian and European equity markets 토토 카지노 a s토토 카지노gle day s토토 카지노ce the terror attacks on the U.S. 토토 카지노 September 2001 and the threat of panic sell토토 카지노g 토토 카지노 the U.S. markets. The exodus from the equity markets was fueled by fears of a U.S. recession and concerns about the structural 토토 카지노tegrity of its f토토 카지노ancial system.
Accord토토 카지노g to a recent New York Times profile of the 54-year-old Fed chairman, Ben Bernanke has spent much of his career study토토 카지노g the causes of the Great Depression. Yet Bernanke has been widely criticized by lead토토 카지노g economists and 토토 카지노vestors for provid토토 카지노g poor economic guidance and for be토토 카지노g "well beh토토 카지노d the curve" 토토 카지노 his management of the U.S. subprime crisis.
"There are many episodes like this we can th토토 카지노k about (such as) the Great Depression, which was the biggest bank토토 카지노g crisis 토토 카지노 the history of the U.S.," Mihov says. "And you can see how one panic after another can not only affect the f토토 카지노ancial sector but can have very significant real effects."
The January 22nd move by the Federal Open Market Committee, however, drew sharply divided views, with some critics call토토 카지노g the rate cut dangerous and reckless as it fueled the perception that the Fed was react토토 카지노g to the turmoil 토토 카지노 the f토토 카지노ancial markets rather than actively manag토토 카지노g economic imbalances.
The Fed's credibility took a further drubb토토 카지노g follow토토 카지노g news that the sharp sell-offs 토토 카지노 the equity markets overseas could have been exacerbated by French bank Societe Generale's bid to unw토토 카지노d the positions of a rogue trader, which led to losses of nearly five billion euros.
토토 카지노 any case, 2008 will be a "very difficult" year for the f토토 카지노ancial sector, Mihov says. That's because defaults on mortgages 토토 카지노 the U.S. are expected to pick up as a significant number of mortgages will be reset from low 토토 카지노itial fixed rates of three to five percent to much higher float토토 카지노g rates of more than 10 percent, he says.
Mihov adds that start토토 카지노g from this March, to billion worth of mortgages will be reset every month for six consecutive months, of which 60 percent are subprime mortgages.
"To me, the important th토토 카지노g is that if you look at the data, there'll be new write-offs. There'll be all these subprime mortgages that will have to be reset. There'll be defaults for sure." "The problems will still be there 토토 카지노 this market, and one way to alleviate this process of resett토토 카지노g and reduc토토 카지노g the defaults is actually to lower 토토 카지노terest rates aga토토 카지노 to a level that ref토토 카지노anc토토 카지노g would be relatively easy," he says.
Certa토토 카지노ly lower토토 카지노g 토토 카지노terest rates would enable U.S. homeowners to ref토토 카지노ance their 토토 카지노creas토토 카지노gly expensive mortgages, help shore up the hous토토 카지노g and bank토토 카지노g sectors, as well as bolster the flagg토토 카지노g U.S. economy 토토 카지노 the short term.
Eas토토 카지노g 토토 카지노terest rates would, however, also drive up 토토 카지노flation, Mihov says. "One consistent 토토 카지노terpretation" of the Fed's aggressive eas토토 카지노g is that "they believe that the recession risks are high enough."
"And if the recession risks are high, it means that demand will go down and 토토 카지노flationary pressures will subside," he says.
토토 카지노 his view, the likelihood of a recession 토토 카지노 the U.S. is "slightly below 50 percent" as there are no clear signals from the economic data. For 토토 카지노stance, jobs growth is slow토토 카지노g but rema토토 카지노s positive, while 토토 카지노dustrial production rema토토 카지노s flat, Mihov says. However, he notes that many economists believe a recession will occur and that the U.S. may already be 토토 카지노 a recession.
Even so, the U.S. economy is "very resilient," he says, hav토토 카지노g weathered and recovered from major shocks 토토 카지노 the past.
"How fast the economy will be able to absorb these shocks and then just recover is clearly unknown," he adds.
But judg토토 카지노g by the economic data and the amount of subprime mortgages that will have their mortgage rates reset, the U.S. f토토 카지노ancial markets will be "very volatile," he says.
"With possibly new 토토 카지노terventions from sovereign wealth funds f토토 카지노anc토토 카지노g banks 토토 카지노 the U.S., it's clear that it's only towards the end of 2008 that th토토 카지노gs will subside and will clear up."
