I am so confused. Need someone with some heavy duty banker knowledge

This is how I understand it...

On the news they say, the Fed 'lowered interest rates' to boost the economy.

So... I think they are talking about the interest rates that banks charge one another when they loan money to each other so that they meet reserve requirements.

But the Fed does not issue a decree.

No, the Fed INDIRECTLY manipulates the market to get the interest rates down.

They do this by buying bonds from banks. They create the money from thin air, and go on a wild spending spree, buying bonds on the 'open market' from these banks.

Then, theoretically, since all of the banks have so much money, they need to loan it...

...but since all the banks HAVE money almost no one needs to borrow money.

So to remain competitive, the interbank interest rates start to drop.

And this process repeats until interest rates hit the average interest rate hits the target the bank was looking for.


WTF? If I have this right, this is the most insane fucking thing I have ever heard.