Surprise, surprise. Bernanke is not going to give up on his belief that inflation will solve everything. Today, he and his fellow central bankers around the world have acted in concert to present themselves as financial action figures. Despite the fact that the U.S. Dollar has become something akin to the Zimbabwean Dollar, Bernanke has ordered the Fed’s “key rate” cut to 1.5%, which essentially means that the Fed now has negative interest rates.
NEW YORK (CNNMoney.com) — The Federal Reserve, working in coordination with other central banks worldwide, enacted an emergency interest rate cut on Wednesday.
The Fed lowered its fed funds rate by half of a percentage point to 1.5%. The central bank’s statement said the move was necessary because of the worsening crisis in global financial markets.
“The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability,” the Fed said.
The rate cuts are just the latest in a series of groundbreaking moves by the world’s top central banks to try to breathe life into embattled financial markets.
Earlier in the week, the Fed took steps that could potentially make trillions of dollars available to banks and the nation’s leading businesses. That’s on top of the controversial $700 billion Wall Street bailout approved by Congress Friday. Earlier Wednesday, the Bank of England announced a bailout plan of that nation’s banks, as it said at least $350 billion will be made available to British banks.
U.S. stock futures soared on the news of the rate cuts, after five days that saw the Dow Jones industrial average plunge more than 1,400 points.
No doubt, this one-day jump in the markets (to be followed by several days of declining values) as traders give the Pavlovian response to this “historic” action will be cited as “proof” that Bernanke and his friends are following the “correct” strategies.
Yet, it seems that even the “experts” realize that “easy money” got us into this fix, so does it not logically follow that we need to stop this “easy money” strategy? The best way to describe Bernanke’s madness is to draw an analogy to the band in “Animal House,” which tries to march through at wall in an alley. Toga! Toga!!7:56 am on October 8, 2008 Email Bill Anderson