In recent days, Ben Bernanke, Fed Chairman, has fallen on his sword and said that the Fed stands ready to provide the liquidity to stave off any severe economic slowdown. Additionally, he made a speech before Congress in which he said he believed the US economy needed an economic stimulus package. My recollection is that on the day he spoke of the need for a stimulus, the market fell nearly 300 points. President Bush, in recent days, has also spoken about the need for an economic stimulus package, perhaps $150 billion. His speech was ignored in the US and is said to have been the cause for the shellacking that international stocks took on Monday, the reason: foreigners don't think it is enough. President Bush and Fed Chairman Bernanke are only making things worse by talking about things that might or might not happen. They need to act. Here is my suggestion. Mr. Bernanke, the markets are telling you that the Fed needs to cut rates. Do it Monday morning. Do not wait for the the big pow wow on the 29th and 30th. Surprise the markets with your boldness. Gain the wind gauge as the sailors say. Do not let the markets gyrate madly over the next week, only to give them about what they are expecting. This is becoming a giant game of chicken. The markets beat us up day by day and you give us a little tea and cake. The markets know it's not enough and the beating starts again. Give us some meat and give it to us when we are not expecting it. President Bush. Do not leave the US economy is the shape in which you took it over in 2001 -- almost in recession. If the economy truly needs a short-term stimulus package, get it done. Don't talk and hint and blame. Just call one of the loyal opposition who has a habit of getting things passed through both sides of the isle. You will be helping the American people no matter who wins in November. Please don't play the sad game of stalemate politics. That has been going on for far too long.
Monday, January 21, 2008
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2 comments:
This is the standard Wall Street whine about wanting lower interest rates. The Greenspan era was great only because of two huge tailwinds: reduced defense spending and globalization. These tailwinds are either gone (defense) or greatly reduced (the low hanging fruit of the globalization shift has already been picked). Our economy will have normal cycles of growth and recession. Both are important and good.
The current Fed has done a great job considering the circumstances. We still have very significant inflation and they cannot lower rates much further without creating a real problem down the road. Look at the EU, they are holding rates for now and citing inflation. The early part of this decade was very unusual in that inflation was very low and Greenspan was able to lower rates to ridiculously low levels. With the dollar at such low levels and inflation a very important factor, rates cannot go too much lower.
Sounds like the kids complaining.
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