“To me, it makes me very happy.”

Why The Federal Reserve Cutting Interest Rates To Zero Is Not Cause For “Happiness”

The only reason the U.S. central bank would be taking this action is things have gotten unexpectedly bad, unexpectedly fast

And it needs to do it to — hopefully — hold the banking system and the economy together. So it’s kind of the exact opposite of a happy situation.

We want to keep this as brief and simple as we can, so at the risk of oversimplifying, the Fed is trying to accomplish a couple of things:

1. It’s trying to force people to spend money by making it worthless for them not to. Consumers right now are hoarding cash, just like everything else. By creating a situation where there’s no benefit beyond safety to keeping money in the bank, it’ll hopefully spur spending. Mortgage rates, for instance, should drop to or near their lowest levels ever. Making it a great time to buy real estate. But are people really going to be out looking at that kind of investment right now? And even if they are, will banks give them a loan?
2. It’s trying to force banks to lend money to people and businesses even though they have no clue whether they’ll be able to pay it back. Even if they’ve been good customers. We’ve talked extensively about the lack of visibility…