Tuesday, January 22, 2008

Fed Cuts Rate By 0.75%! What This Means For You, And Whether You Should Be Hiding Under Your Desk Right Now

Author: Nick
Category: Money

warning, this economic news may not be suitable for children

Breaking News! Warning! Attention! Emergency Alert Notification!

Hopefully you’re reading this now, because what I’m about to say will have a profound impact on your life for the next 2-3 minutes. Are you ready? Okay, here it goes.

The Fed—a.k.a. Kevin Federline—announced today that it would drop its key overnight lending rate by 75 basis points, from 4.25% to some smaller number, possibly 3.14159. While the Fed has been known to raise and lower rates in the past, this latest rate change came as a total shock to the entire world for three very important reasons:

  1. It was on their day off. The Fed only works about six days a year, and then only for 30 minutes each day. The rest of the time, it plays pool in the basement of the Treasury building and debates whether or not a 3-dollar bill should be created so that Bill Clinton can finally be immortalized on our nation’s currency.
  2. It was a lot of basis points. Usually the Fed only changes the rate by 25 or 50 basis points. This is the first time it has been dropped by 75 basis points since 1982. The drastic drop was seen as a necessary step to prevent inflation, recession, and chunky thighs.
  3. The announcement was made during Judge Judy. While the early timing of the announcement was seen as required in order to prevent U.S. markets from responding to severe drops in foreign markets overnight, the Fed has apologized for making it during everyone’s favorite court show. It has promised to keep all future announcements restricted to the hours between the crazy Texas judge show and the angry Hispanic lady judge show.

Recent fears of recession were the primary fuel for the Fed’s rate-cutting fire. Other reasons for the cut included worries about rising consumer prices and a disappointing return when the Fed Googled itself and saw that it hadn’t been in the news much recently.

While the sharp rate drop has many people still worried that the economy has entered a tailspin, these people are the types who get all of their financial news from humorous personal finance websites, so they’ll believe anything anyone tells them. Well I’m here to tell you that you have nothing to worry about because the economy is indeed collapsing around you at this very moment.

Oh, I’m sorry, I meant to say everything to worry about. Specifically, you should be worried about these ominous bullet points:

  • Your 401(k) is in the toilet right now. This morning, you had about $50,000 in your retirement funds. Right now, that should be down to about $2.99. Go buy yourself a nice lottery number prediction book from the supermarket checkout, because that’s your only hope of retiring right now.
  • The major U.S. trade partners are hurting. Markets in Europe and Asia are bleeding profusely. Japan in particular is seeing its economy faltering. Most importantly, this means your chances of finding a Nintendo Wii on store shelves before August 2009 are now almost non-existent. But at least we’re taking the rest of the world down with us!
  • Jobs may take a hit. Interestingly enough, when businesses aren’t making a lot of money, they tend not to be able to pay their employees as much. If you’re at work right now, take a look at the person to your left and the person to your right. Odds are high that one of them is on the phone right now getting you fired for browsing the internet at work.
  • Food prices will continue to skyrocket. If you think $3.50 for a gallon of 2% milk is expensive, soon you could be paying $10 a gallon for 0% milk—that is, an empty plastic jug. Talks of a strike in the Cow Union will only exacerbate this situation.
  • The housing slump may soon be over. It seems the Federal government is doing everything possible to ensure housing prices remain at their miraculously high levels. This means your dreams of moving out of that cardboard box you call an apartment may just slip through your grasp as the two-bedroom starter home down the street that the original owner bought in 1995 for $50,000 goes on the market for $1.3 million.

Worry not, Punny Moneyans. Uncle Nick will take you under his wing in these troubling times and provide you with the financial guidance you need to weather the economic storm. Tune in next time when I’ll show you how to turn those worthless dollar bills in your pocket into delightful table centerpieces.

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