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The Fed cannot fix the virus problem. It is not in their control. They are only delaying and mitigating the risks that occur as a result of the virus related s

by smdz 7y ago

The Fed cannot fix the virus problem. It is not in their control. They are only delaying and mitigating the risks that occur as a result of the virus related slowdown. That is in their control (at least for a while) This slowdown because of bans and quarantines will hit the cash strapped businesses a lot, especially small businesses. They will have to layoff. People will lose their jobs. When businesses actually start to shut down, you are looking into a deeper economic pain that will most likely lead to a recession. By reducing rates, they are giving small businesses and people a little breather. And they are assuming the virus impact will be clearer in the next couple of months.

wycy 7y ago
Increasing the access to credit really only helps if there's a belief that businesses will take out credit in order to continue operations despite the lack of business, but it's hard to imagine they would do that. The problem is that there is no demand for their businesses, so why take out credit just to not be able to actually leverage it?
- tracer4201 7y ago
  Your post is sitting at negative points as of when I’m writing this comment. My understanding is the same of yours. If someone here has expertise in this field, please enlighten us and explain what’s wrong with this conclusion instead of just downvoting. Thanks!
- gizmo686 7y ago
  There are 3 main ways this crisis can go for a bussiness: 1) Keep operating throughout the crisis while remaing solvent. 2) Cut losses by suspending or reducing bussiness during the crisis. Service debt and other non suspendable bills through credit or savings. Reopen after the crisis and return to bussiness as usual. 3) Attempt to do 1 or 2, but become insolvent. Don't reopen after the crisis passes, because your bussiness failed and is now closed for good. Providing credit can move companies from 3 to 2, which will greatly improve our ability to recover.

by smdz 7y ago

wycy 7y ago

Increasing the access to credit really only helps if there's a belief that businesses will take out credit in order to continue operations despite the lack of business, but it's hard to imagine they would do that. The problem is that there is no demand for their businesses, so why take out credit just to not be able to actually leverage it?

tracer4201 7y ago
Your post is sitting at negative points as of when I’m writing this comment. My understanding is the same of yours. If someone here has expertise in this field, please enlighten us and explain what’s wrong with this conclusion instead of just downvoting. Thanks!
gizmo686 7y ago
There are 3 main ways this crisis can go for a bussiness: 1) Keep operating throughout the crisis while remaing solvent. 2) Cut losses by suspending or reducing bussiness during the crisis. Service debt and other non suspendable bills through credit or savings. Reopen after the crisis and return to bussiness as usual. 3) Attempt to do 1 or 2, but become insolvent. Don't reopen after the crisis passes, because your bussiness failed and is now closed for good. Providing credit can move companies from 3 to 2, which will greatly improve our ability to recover.