The Federal Reserve’s latest interest rate cut, which effectively made interest rates to zero, is quite tricky. At the outset, the zero interest rate seems enticing to the borrowers. Getting a loan with very low interests is certainly appealing to the public. But the question is, who would want to loan now? And the more painful question is, can the banks afford to lend out money at this time? With the ongoing financial turmoil, the banks’ priority is to clean out their balance sheets first, that is to say they’ve got to collect the money they previously released to the borrowers. So, definitely, lending out money would be least on their priorities. That is the painful reality. Therefore, the Fed’s interest rate cut appears to be of no substantial effect at this time.

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Posted by Jones on December 31st, 2008 :: Filed under $$$ CRISIS, EVERYDAY MONEY STUFF, SIMPLY SCANDALOUS
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