Signs the economy is going to get worse
The world economy is going into recession. The US is sinking fast, and the world markets are being dragged down with us.
I know that for most policy makers, the US stock market is the amorphous “market”, but there is something extremely dangerous about the
The interest rates will fail for two reasons. First, the problems with the economy are more systemic than the Fed is wiling to admit. The solution is much like applying a simple bandage to someone who’s already lost a leg.
Secondly, the purpose for an interest rate cut is to increase the supply of money, but the current woes of the global economy are about a lack of available credit in the first place. With most major banks reporting losses of several billion dollars each, it is unlikely that there is much more money that can go into the economy.
Thirdly, there is the looming problem of inflation. With oil and food prices rising substantially, there are already inflationary pressures that threaten to dismantle the economic engine, no matter what the Fed decides to do.
While it may hurt, we need to take more of a Paul Volker approach to the economy. Instead of giving short-term interest rate cuts, we need to keep steady or even raise interest rates in order, painful though it is, to defeat inflation allow the economy to fully correct itself.
[From Fed Cuts Key Interest Rate as Asian Markets Drop for Second Day]
