Fed Funds Rate Irony

Two wrongs don't make a right, but isn't it ironic that the Fed Funds Rate is currently one hundred basis points higher now than it was back in May 2004?  Yesterday, the S&P 500 fell to price levels not seen since May '04, and back then the housing market was right in the middle of its epic boom while stock markets were right in the middle of a multi-year bull.  Currently, home and stock prices are in free fall, but the Fed Funds Rate is at 2.00% versus 1.00% in '04.

Comments

[p]

excellent graph

[SINGER]

I agree! I usually stay calm about the markets, even with the current situation, because of my relatively low exposure, but that headline -- UGHHH! Something to the effect of
"Bernanke Hints at Interest Rate Cut"... Hints!!! So they come all this way with the CP Facility, Bailout, TAF, etc., and we have a 2% Fed Funds... Especially when thats all "main street" investors focus on... Ridiculous, absolutely ridiculous! I know, when the S&P hits 750, then they should lower rates... HANG BERNANKE!!!

[Russ Wood]

Not ironic, sickening.
There was no economic justification for the Fed to raise rates in 2004. Growth was good, inflation was low, gold was stable, etc., etc. But Keynesian fear that good times always lead to bad times made the Fed hike rates to "slow growth and prevent inflation". They slowed growth alright, they crushed it. They actually created inflation (price increases accelerated after the rate hikes). Now they are on their way back to 1%, with nothing to show for it but a near depression and several trillion in lost global wealth. Nice job.

[Celal]

1% in 2004 was the pump that inflated asset bubbles which are now popping and causing all this meltdown we are experiencing today.

2% (or 1.5% since the co-ordinated rate cut of today) seems a bit more sensible despite the problems of our day; otherwise, there would be another asset bubble getting inflated somewhere.

i think most people have now learned that inflating bubbles is not particularly good economic policy.

[Celal]

1% in 2004 was the pump that inflated asset bubbles which are now popping and causing all this meltdown we are experiencing today.

2% (or 1.5% since the co-ordinated rate cut of today) seems a bit more sensible despite the problems of our day; otherwise, there would be another asset bubble getting inflated somewhere.

i think most people have now learned that inflating bubbles is not particularly good economic policy.

[Jason Sandoval]

Well, as SINGER states, we are back at 1% from '04, "with nohing to show for it" except thousands of people without homes, and even more without jobs. YEA, GREAT JOB FOMC! You should all be taken out back and taught a lesson in Economics 101, under the section of "Capatilism." These banks where doing fine, and when FED's increased rates for 3 years straight, drastically affecting Prime rate and indexes "indirectly," they very "effectively" starting kicking people out of their homes when their 2-5 YEAR ARMS originated in '01-'03 started adjusting at now almost a 5,000% increase in '04-'08, WHAT DID THEY EXPECT!!