Jun
25
2009

This Just in From the Federal Reserve

This just in from the Federal Reserve, compliments of Chet Gohd, owner of RPM Mortgage in Berkeley.  Here is what Chet has to say:

The Federal Reserve concluded their meeting today with leaving interest rates unchanged and offering a few remarks about their view of the current status of our economy. Recent economic reports have offered positive signs in that our economy is slowing down at a milder rate. This is a good sign as in the following oversimplified example:

Picture yourself driving a car up a steep street in San Francisco. Then, as you near the top, the car stalls, engine turns off and the car begins to go backwards AND your brakes aren’t working. Now, after a few yards, your brakes begin to work and the speed in which your car is going backwards is slowing down, thus giving you hope that it will eventually stop(without you hitting anything) and then you can fix the car and begin to go up the hill again..(Wouldn’t this make a great cartoon for the cover of Newsweek so everyone in the US could have an idea of what our country is going through?)

Unfortunately, understanding the state of our economy won’t have an affect on our friends who have been laid off or a program cut from our kid’s school but it is helpful for those who wish to follow the bouncing Bernanke…

As for the technical stuff, I could cut and paste from all the financial sites but instead, I’ll just throw in a little flavor…

Chairman Ben Bernanke is watching to see how quickly the economy can recover from the deepest recession in five decades. The report showing orders for durable goods unexpectedly rose in May, while unemployment continues to climb. The Federal Reserve also wants to quell concerns that the $1 trillion expansion in its balance sheet will fuel inflation, pushing bond yields and (MORTGAGE RATES) higher and crippling any rebound in the economy. I’ll offer the explanation of how inflation is bad in a later writing.

In my opinion, the Fed is not going to be raising rates anytime soon. As for their current initiative to bring down borrowing costs for consumers, they are choosing to stick with their plan and not add to it at this time. I’ll bet that this will change if we see the economy begin to get worse again (slide backward faster) over the coming months and they call the Fire Captain to bring in more Fire Trucks and Air Tankers…

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