I dont understand this. In my economics class we are learning about the financial crises and how things work but i see no correlation between the federal reserve bank and the stock market. Can anyone clear this up for me?
MICHEAL
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By charging banks a lower prime rate they ensure more profit for banks. Financial companies are hurting now, so this will help them. Not much though.
They can’t do a dam thing to stop it
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The companies and the investors have control over all that
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The only thing the government can do is make it look a little better so those people will not abandon ship
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By pumping in tons of cash
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they can’t do anything. Interest rates are practically 0, credit is flowing- their work is done. The market was over leveraged and needs to readjust. It sucks, but it is the way it is.
You can not have a society where no one fails and nothing goes down. We will be better off it we quit fighting the inevitable and take our medicine in one big dose.
The Federal Reserve is a central bank. When commercial banks run out of money (which happens often, as they are legally allowed to loan out far more than they actually have), they borrow it first from other banks, and as a last resort, from the Federal Reserve. In response to the crisis, the Fed has allowed a vast number of businesses other than banks, such as those which gamble on the stock market, to borrow from them. They loan the money at very low interest, far lower than the interest that would be found in the market. The dangerous part is, the Fed does not actually have any money either, they are permitted to print it out of thin air, with nothing to back it except for future taxes. It is borrowed money, either from foreign governments, or added to the national debt. It is this printed money which causes inflation, which is essentially a hidden tax which we all pay in the form of higher prices. It is important to realize, too, that the federal reserve is NOT a part of the government, it is a private bank and is NOT accountable to Congress or anyone other than it’s member banks. The answer to your original question, the Federal Reserve CANNOT help the stock market from crashing, they can only delay it by pumping more money into it. Don’t believe the rhetoric about “increasing liquidity” or “stabilizing the market”,a more honest analysis would describe it as “pumping money” or “inflating”. The bubble which was inflated by an overabundant supply of money is collapsing, and the Fed is desperately trying to “blow it back up” by injecting huge amounts of money into the economy. If you really want to learn more, visit and
