WWGD?
Another half point today? After a three quarters point cut less than a month ago? 125 basis points in less than a month makes it sound like somebody hit the panic button. It almost seems as if the Fed was asleep at the switch when the economic train thundered by with the words "Recession Express" stamped on the side. Seriously, did the FOMC wake up and just realize this? And just how does one "fix" an economy perceived to be ailing because of credit problems? Allow consumers to borrow more? As I remarked to Kalvin today:
"As a dog returns to its vomit...so will a fool return to sub-prime, securitized mortgages."
The signals are mixed right now, GDP grew a bit last quarter, not much, but it was still growing--despite expectations of worse for high energy prices and a slumping housing market. But is there enough there to justify such an adjustment?
Part of me wonders what would Greenspan have done (WWGD!), his reign as Fed chair seemed to be more measured, more thoughtful. Greenspan led. Bernanke (so far) has come across as a market appeaser at best, un-observant at the worst. He follows. One has to believe there is a better way to influence markets than this; in fact, one might make the case economies must contract every so often and macroeconomic factors are just out of our influence. We might be able to ease the pain, but the pain must be felt.
"As a dog returns to its vomit...so will a fool return to sub-prime, securitized mortgages."
The signals are mixed right now, GDP grew a bit last quarter, not much, but it was still growing--despite expectations of worse for high energy prices and a slumping housing market. But is there enough there to justify such an adjustment?
Part of me wonders what would Greenspan have done (WWGD!), his reign as Fed chair seemed to be more measured, more thoughtful. Greenspan led. Bernanke (so far) has come across as a market appeaser at best, un-observant at the worst. He follows. One has to believe there is a better way to influence markets than this; in fact, one might make the case economies must contract every so often and macroeconomic factors are just out of our influence. We might be able to ease the pain, but the pain must be felt.
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1 comment:
I don't know Rob, I think Greenspan helped cause a lot of the problem and now Bernanke is trying to clean up the mess without causing a hard landing of the economy. The housing bubble has been building since 2002 and could have been deflated more easily then. Just like the doc com stock bubble was building for several years in the 1990s and could have been deflated with less pain instead of waiting for it to burst in 2000/2001.
The only way out of this is to let people and businesses have time to pay do pay down debt but that will reduce economic activities so other countries will have to step up and grow their economies with domestic consumption instead of just exporting stuff to the US.
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