The Fed's Plan 3/11/08
The Market is currently on a 200 point rally today. Shame on me for posting such a depressing analysis yesterday? I would have to disagree.
Basically, everyone is happy because the FED is going to allow troubled banks to keep their loans longer, and they're injecting MORE money into the system. Of course we would expect a short market rally, because that is what the market wants the FED to do. All these people who made bad mortgage investments are crying for a bailout, and this chairman is not going to let the politicians down in an election year!
I believe it was our own Mr. Benjamin Franklin (who is also feeling the crunch of the declining dollar) who said that insanity was doing the same thing over and over again and expecting different results. The FED is just adding more liquidity to the market coupled with lowering interest rates. This is usually sound policy, but now the other variables have come into play.
Our trade deficit, our budget deficit, and inflation are more problematic than they have been in the recent past. This move by the FED will devalue our currency more, boosting gas prices higher, and making the dollar weaker. Wall Street will rally, but everyone else is going to feel the pinch of inflation, which will make its way back to Wall Street. The politicians are just hoping this happens after November 6.
2 comments:
Mort Zuckerman was on the neocon show Morning Joe, and he said the U.S is not only in a recession, but it will be the worst recession since World War II.
Octavion, I agree completely that todays rate cut was a bad thing for many reasons..........as you stated it is fueling a devaluation of the dollar and strong inflation which erodes the standard of living for the working class.........further the rate cuts have in my opinion only served to make the Fed appear toothless and incompetent since fixed rate mortgages and credit card interest rates have not come down at all and banks are really not willing to pass on the savings to consumers to to their fear and aversion to risk.....and in an economy based on debt and credit fueled growth that signals the end of growth and the start of a Depression or severe recession.
The Fed has to restore liquidity but providing welfare to the wealthy elite at the expense of the working class isnt the answer.........they need to keep things from inploding by letting the reckless insolvent wall street firms fail and keeping the stronger ones solvent so they can loan money, they also need to keep the masses from losing their homes and starting a vicious circle of forclosures that causes deflation and massive unemployment and job losses that once it starts like the Great Depression might take a decade or two to crawl out of.
This hypocriical notion that corporate bailouts and welfare for the weathy is a GOOD thing while helping to bailout the working class to save their homes or get medical insurance is some kind of heinous welfare or socialized medicine and a step towards communism.
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