Wall Street has now priced-in a near 90% chance for a 50bps cut, so do you think Ben has the guts not to comply? Sadly, I don’t think so. His actions clearly illustrate that the stock market, not the economy, drives his decision-making. He knows the market will sell off if he doesn’t comply with Wall Street’s wishes, so another unnecessary cut will be handed to Wall Street on a silver platter.

An interest rate cut today would be totally unjustified. Recessions are a necessary part of economic growth, and over-reacting will do nothing but cause a whip-saw effect in the economy, which will cause even greater issues in the future.

While Ben is catering to the wealth of Wall Street, fixed-income individuals are being ravaged by lower incomes and raging inflation. Of course, there is no inflation, unless you need to drive, eat, or keep your lights on at home.

Ben will hand Wall Street what they are asking for, and strip the wealth of all those but a select few, while the economy still works through a recession. Another cut will only serve to extend the recession.

And I think Ben is stuck on this one. The market wasn’t just losing money after MLK… it was crashing BADLY. It was an “emergency” rate cut. Did Wall Street have it coming with its multi-trillion dollar debt-based holdings and derivatives? Sure! Did the average holders of 401Ks? Nope! Do the average holders of savings accounts and CDs? Nope, again. Ergo, a rock and a hard place with how to proceed on Fed rates for ANY group of Americans.

I agree, of course, that this loose-money policy will just lead to more inflation and dollar devaluation, but that’s the trend of our fat, indebted nation, so why does anyone expect that to go away?

Monetary and fiscal policy has to be changed AT ROOT before the negative effects will disappear.

What you’re all asking for is to have your particular form of nest egg be “poisoned just a little bit slower, instead of all at once.” Great for you old folks who are gonna kick it in 10 years, but sucks for us 24 year olds who have to live with the crap!

http://www.federalreserve.gov/feedback.cfm

Still, it was the FOMC’s lack of purpose and initiative in bringing about a soft landing that caused the emergency rate cut last week. So who is at fault? The Fed’s hands are tied now to pleasing Wall Street because the economy is as bad as it sounds. Read every day in the business world and most companies took a hit.

This housing bust is worse than the stock market bust in 2000 in that more people own a home than people who invest in the Tech stock market. The housing situation held up during the Stock market crash and continued to rally due to low interest rates. In addition, consumer spending continued due to easy credit. People feel wealthy, and that drives the economy. Now, people who own a home is affected, homes prices dropped, lending restrictions are much tighter, people feel the credit crunch, the economy took a semi-hard landing…

The general consensus, or so it appears by the American people, is that the FOMC did not do enough. Now the Fed is doing whatever they can to rectify it, including an emergency rate cut. If the hoped for 50 basis point reduction does not happen tomorrow, it will bring confusion to Wall Street again.

“The needs of the many outweigh the needs of one”… If Bernanke takes this personal as the author of the article implies, 2007’s downturn will continue well into 2008.

In my humble opinion…

the fed cut rates because of the dire situation with the muni bond insurers

if they go bust and the 2.4 billion they insure gets downgraded its really gonna be showtime out there

the fed is way behind the curve

they spent most of 2007 saying the subprime was contained

I think if we had a smart person running the fed and a smarter president like Reagen was, than we would want higher interest rates so that people dont put all their money into the stock market and make it over valued to who ever wants to buy into it.

If rates were back to where they were at in the 80’s than we would have people living inhomes they could actually afford and we wouldnt have the stock market so over valued, we would have people willing to leave their money in a bank to make better money off of that than moving everything they have over to the stock market in hopes of getting that 10% return on their money.

Simple economis 101 I said, why can the fed not figure this one out for themselves. they have done nothing but hurt the USA dollar by dropping rates so low, but of course lets look at what everyone wants rates low for. New car loans and home loans being so low lets do it push it further down and let me put my money somewhere else.

What can be done is for congress to stop bickering and pass some of the mortgage bills through ASAP. If we let Fannie Mae and Freddie Mac buy loans above $417000 this will be the equivilant of lowering the interest rates for these well quailified borrowers by as much as 1% without any monetary policy. Similarly, increase FHA’s limit, and make it easier for brokers to become FHA approved. The main reason borrowers were not put into fixed FHA loans in the past is because their brokers were not able to originate these loans. No broker is going to tell his customer to go somewhere else to get their loan, instead they did what they could to get the loan closed and that usually was a subprime adjustable loan.

Finally the Fed needs to completely re-think how they calculate inflation. They are completely ignoring housing prices in their computation. This is what prolonged their expansive policies. They continue to use only rent costs. Well from 2002 to 2005 everyone with a pulse was buying a home instead of renting. This was depressing the number of renters, and holding rent increases down. Now with no one able to get loans, the number of renters is going back up and will continue to drive up rent cost, making it appear there is inflation in housing! A better barometer needs to include the wealth affect of housing increases. For a vast majority of Americans their home is their largest asset. If the value goes up they feel rich and spend. Now the value is going down so we feel poor and don’t spend regardless of what interest rates are.

Well it seems like no one has appetite for this sort of thing since, the underlying causes are too murky to even mention.

Our dear Jim Cramer has promised he will definitely spend an episode to enlighten us on this topic.

Does lowering the rate help Wall Street? It is hard to say, since the effects will not bee seen for a while. I can tell you that the Real Estate Market has seen some improvement since November (at least in my area) and they are partly due to the interest rates.

The economy is global and the dollar has been week for at least two years. Read Mr. Richard W. Fisher (Federal Reserve Bank in Dallas) about Money and the Global Economy (http://dallasfed.org/news/speeches/fisher/2008/fs080117.cfm)
and it should give you some idea that the economy is no longer local.

Walmart, K-Mart, Costco, Dell, IBM, Ford, Chevrolet, GM, McDonald’s, Burger King, Old Navy, The Gap, American Eagle and a million more other retailers purchase their merchandise abroad.

Even Levis (which still has a plant in San Antonio, TX) no longer makes its own textile. Plants in India and China purchase the US Cotton and make just about any textile you wear today. Did Mr. Greenspan or Bernanke made the current global economy?

No.

Thanks to Unions and the U.S. Government our factories can no longer compete in the World market. We may hate France and the French but we are headed towards the same. The only thing the French make that is exported is Wine, Weapons and Electricity. Sure they export other goods (cars, clothes, cigarettes, etc) but not in great quantities.

India is the Number One producer of Textiles in the world. Just ten years ago India was only known for its Silk, now they make any textile you like. It is not because their textiles are the best but because they are the cheapest since their labor is basically indentured slave labor. I know I have met these people. The computer I am typing this message on is a Dell and it was ‘assembled in Texas’ but it was made in China. Every component (LCD, Hard Drive, Motherboard, Memory, CD Player, etc) were made in China. The days in which China was thought of cheap products (I remember them) and made little plastic toys have long been gone.

Vietnam has the largest after market (Not OEM) auto-parts industry in the world. They make Fenders, Hoods and trunk lids for Mercedes, BMW, Honda, Acura, Ford, Chevy, SAAB, Lexus, etc. They also started making Alternators, Fuel pumps, Bearings and more.

This country complains about the gas prices and the interest rates. Gas in any of these countries is three times as expensive as it is in the U.S. and if you try and get a loan there a 10% interest rate would be a very nice interest rate.

What these countries have is cheap labor and governments that support their factories (IE no taxes or little taxes).

You want to stimulate Wall Street and the Economy? Take away the taxes for all the working Joes that produce a product in this country and allow the Factories to pay them full Healthcare instead of paying FICA and Social Security for their employees.

Oh! I forgot that Congress, the Senate and the White House are ran by folks that earn their paycheck thanks to our taxes. They also do not pay FICA or Social Security taxes either and they all get a nice retirement check after they serve one term.

Writing a check to the American public is a band aid but lowering interest rates is part of the game played not only in this country but around the world. You want to help the economy and Wall Street then buy goods made in the U.S.

Drive a Ford or Chevy (even though most of their parts are made overseas) wear Dickies and Nike. Go out to eat once a week at a local restaurant and buy food that was grown in the U.S. and buy an Apple computer.