First off I have socialist views and believe in public welfare but bailing the system out of this crisis will only worsen the blow down the road. The problem is your saying this current crisis. This is Bushes and the Feds crisis because they did not let the economy recover in 2000. At this point the deficit has doubled in 8 years and the dollar is worth crap. I donât think they know how to fix it quite honestly. I feel everybody looking for the magic pill from Abbott Lab or somebody but time is the only cure.
FED is doing two terrible things: 1. Helping banks on the expense of people (lower interest means lower the value of the dollar). It would be better to just take money outright from us instead of taking it in a way average Joe does not see it. 2. Business currently does not need money. Any other money goes straight to the hands of those who either hoad it, or buy physical assets which accelerate the inflation even further. Read what is happening to even basic food, which has quadruled. http://www.elitetrader.com/vb/member.php?s=&action=getinfo&userid=90992 The FED chairman does not understand what he is doing. He should be fired, as well as all the Fed bankers who sit next to him, and replaced by solid people who are not elected to the board on the basis of a consideration other than intellectual quality. Go back just few months ago. The majority (except people like me who were stoned for saying things are wrong) was saying this bull has legs, the world is flush with cash, corporations that rich with cash cannot do anything but give away or spend cash, and therefore the economy will run faster than anyone can imagine. Where is all that talk now? The next day the situation becomes the opposite. Such people are lying/wrong one way or the other or both. You cannot be flush with cash today, and have your pocket dry the next day. The Fed did also say the world is flush with cash just a week or so before saying the world is dry of cash. The majority of the talkers in here, and in the Fed are just plain wrong. Here what the fed might even do in the future: increase interest rates in the future when they realize the hyper inflation that is taking place. The money is not going to business creation, but to inflation.
Lower short term rates at some point (and I think that point has alreday been reached) are counterproductive when you have a large foreign debt to service. Yes you debase the currency but you drive up long term rates. No wonder the long bond was cut in favor of the 10 year for refinancing the debt, we couldn't afford to refinance at 30 year rates. Driving the economy in to short term debt instruments creates a lot more volatility and certainly gives the Fed and large market participants more power, perhaps this is their game.