Word: feds
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...rate cuts, which would bring us into uncharted territory. The federal-funds target rate previously bottomed out at 1% from June 2003 to June 2004. The actual federal-funds rate did drop below 1% a few times in the 1950s, but that was another era - an era when the Fed didn't announce interest-rate targets, banks completely dominated the financial system and the U.S. completely dominated the global economy, and there was no such thing as a money-market fund...
...federal-funds target rate were cut to 0.75%, many money-market funds that invest exclusively in government debt would struggle to cover their costs and still pay a positive return to investors. The Fed has a new facility in the works, the Money Market Investor Funding Facility, that's intended to ease these pressures. Once that's up and running, don't be surprised if short-term interest rates keep dropping, even to 0% - as was the case in Japan from 1999 to 2006. The Fed would literally be giving money away...
...that wouldn't be the end of it. In November 2002, during his first stint on the Fed - as a mere member of the board, not the chairman - Bernanke gave a now somewhat infamous speech about what central banks could do to fend off deflation even after short-term interest rates hit zero. The Fed could target longer-term interest rates, he argued. It could buy private securities, not just Treasuries. It could, figuratively speaking, drop money out of helicopters...
...throwing money at the economy's problems is not without risk, and it will be interesting to see whether the Fed is able to react quickly enough in the other direction when the economy finally takes a turn for the better, and avert the inflationary spiral that Bernanke's critics have been warning about all along...
...Should New Zealanders decide to discard their 58-year-old Prime Minister, they will do so largely without relish. Aiming to gauge the nation's mood by traveling the country to speak to men and women from all walks of life, TIME found that while many are fed up with her government, nearly all concede a grudging respect for Clark. "She hasn't dropped a pass," says Stuart Wright, a sheep and potato farmer in Sheffield, west of Christchurch. Like Wright, Ken Arthur, a winegrower in Blenheim at the top of the South Island, wants Labour ousted. But he respects...