I just do a quick simplified one, will explain more in the upcoming workshop:
First... Rate Cut:
No doubt rate cuts can boost exports, but lets look at rate cut from another angle. Oil prices is primarily driven by supply and demand, but lets not forget its also traded in USD. This is part of the reason why Oil crossed $100, as USD dilutes. So after a rate cut, USD dilutes boost exports... however energy prices also goes up... the world uses energy, oil producing nations will be forced to Increase supply to drive the price down (which is happening right now), and in turn, less money flow back to the US cos of the falling oil prices.
summary: Cut rates boost export, but the international pressure to keep oil price low while USD devaluates will drive US economy into a worse state.
Second, Bush's relief plan:
Bush's relief fund is primarily drawn from the government reserves. Thus, US is indirectly loaning money from China and Japan to fund its economy. By drawing money out from the government reserve (which is borrowed) they are landing themselves into a greater government debt. To solve this problem (for the short term) Fed chairman Ben Bernanke is forced to cut rates (aka print more money) to ease the current market situation (band aid solution).
summary: borrow money to return debt (imagine borrow from ah long to repay bank loans), not a good move... personal opinion.
Any valuable feedback is appreciated... so i can have another angle of approach.
Cheers~
Don
view the full discussion here: http://forum.channelnewsasia.com/viewtopic.php?t=120481
No comments:
Post a Comment