US Federal Reserve pushes US markets back into red

US stock indices have risen slightly on Tuesday, but by no means does it look like a full recovery from Monday’s nosedive. And the US Federal Reserve’s comments were enough to push the markets back into the red after a day of modest gains.

The Federal Reserve met for the first time on Tuesday after the US’s credit rating was downgraded. It announced that US interest rates will be kept at record lows for another two years until 2013.

Stocks initially fell after the Federal Reserve made its announcement, as many investors were anticipating that the Fed would do a bit more to help reassure nervous investors.

Interest rates in the US have been near zero since December 2008. Many experts believe that such low interest rates are actually hurting the economy, as the banks are squeezing lenders for more profits and then it becomes a systemic kind of web with everyone squeezing one another.

A year ago Federal Reserve chairman Ben Bernanke announced publicly that the recession is basically over and it is just going to take a little bit of time for the people to feel this. Right now all the American people are feeling is a huge squeeze.

The Nasdaq rose by three per cent and the Dow industrials were up two per cent Tuesday morning, showing a tiny sign of optimism following Wall Street’s worst day since the 2008 financial crisis.

Nevertheless, this does not eliminate the fact that the SP downgraded the US credit rating from AAA to AA+ for the first time in history.

Meanwhile, there is a lot of instability and uncertainty on Main Street as the economy is not faring well.

There are at least 14 million Americans without jobs and additional 6.6 million people became discouraged from the possibility of finding a job and quit looking, according to the Department of Labor.

Wages are very lean and the gas prices are going up.

Moreover, the debt ceiling increase deal reached in Washington includes cuts in federal funding to social programs, such as the Food Stamps program.

A lot of services that people rely on are being slashed. Post offices are being closed down, RT’s Marina Portnaya reports.

Billions of dollars are being put into the economy to help restart it, but people are holding on to their money as they do not know what will happen next. There is hesitation about spending, which is crucial for America’s consumer-driven economy.

Frustration and anger are increasing among the everyday people, who are doing their jobs and paying their taxes.

­Huffington post columnist Eric Margolis believes that the government is once again helping the banks at the cost of ordinary consumers.

“It certainly will dismay savers and retired Americans, all the people who put their money into retirement accounts and planned to live off the interest on these accounts,” he said. “There will be no interest and there will be no income for a lot of them.”

Leave a comment