Federal fund Rate freefall

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Federal Funds Rate Freefall What is the Federal Funds Rate and what does a low rate mean to the Fed Chair, Bernanke? The Federal Funds Rate is the overall number representing the tools the Fed uses to steer our economy away from extremes of inflation or deflation. When the rate is higher, it’s almost like a built-in toolbox, unless it goes so high that you cannot no longer realistically raise the rates and sustain any degree of growth.
When the rate is precipitously high or low it takes away any give in the system, making the Fed powerless to affect a global economy.
The Federal Funds Rate is now down to .5%, dangerously close to zeroing out, officially announcing all the slack in this economy is gone.
Slack in a debt-based economy is crucial to allow for the flow of deflationary and inflationary forces in a volatile, debt-based economy, like not yanking that trout out of the water for fear you’ll snap the line.
In debt based economies, you need to have a constant influx of capital to replace all the printed money going out the other end to mortgages, credit cards, business loans, student loans, etc.
Businesses within these closed systems that require this outside fuel tend to develop short-term strategies over long-term ones, as they always have a pressing need to feed the flow of cash going between them and their creditors.
This short-term approach has also forced the ceos at the top to come up with creative accounting to show to the stockholders an illusion that money was coming in and being converted to a real value.
But the value being created, the capital raised through stock market investor dollars, was borne not from the performance of companies, but rather the incremental value added into the system from the sheer proliferation of mutual funds, hedge funds, etc.
This Federal Fund Rate number has been the way the Fed has kept the whole house of cards from falling away to a fine mess of cards scattered in the wind. At a time when the debt-based economy is collapsing due to the artificial values built into it through stockholder proliferation, and excessive credit marketing and distribution, the Fed wants to encourage more buying and less saving, the very tactic that brought us to where we are today.
Freedomist.com is the place to go to read what your local government representatives are doing about the bailout boondoggle, the place where we will turn the spotlight on these folks, from Bernanke to Paulson, to anyone else who knowingly perpetuates this debt-based economy.
Go to Freedomist.com and follow your representative for the Freedom Congress, or read our Hall of Records for all the news about your local representatives.
As long as the Fed continues to use this Federal Funds Rate tool to try to perpetuate their debt-based economies, we at freedomist.com will shine the light in every dark room of every dark hall in every town, village, city, and state in America.
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Paul Collier, Freedomist.org
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