The Federal Reserve cut a key interest rate to its lowest level ever, in turn prompting a one day stock market rally. Specifically:
The central bank cut its target for the federal funds rate, at which banks lend to each other, from 1 percent to a target range of 0 percent to 0.25 percent, the lowest rate on record. Although the Fed has no more room to reduce the interest rate — it has been cut 10 times in 15 months — the bank’s leaders said in a statement that they would use “all available tools” to bolster the economy.
I’m not saying that policymakers don’t see these as desperate times… but surely this is extraordinary: a belief that virtually free money is required to be injected into the financial system. Insofar as the big banks have taken the recent bailout money injected in them and, like many people did with their stimulus checks, stuck it in their pockets, rather than used it to stimulate the economy. This, of couse, is because the individual incentives of individual bankers is to try to increase their own company’s bottom line in the hope of increasing their own bonuses and other compensation; they could not care a jot about the economy writ large… which is, of course, the collective thinking of everyone which got us where we are today.
Traditionally, it is the government that thinks systemically; even in classic libertarian theory, the government at least acts to stem force and fraud to ensure private activity is smooth and efficient. Ah, but recent Republican doctrine is that the purpose of government is to suck money to the connected, and to facilitate force and fraud. (See Bush Administration, The).
Well, I certainly hope that, contrary to the actual evidence, the policymakers now know what they are doing, and these desperate measures will start to turn things around. In the meantime… less than 5 weeks until
Jesus SupermanBarack Obama assumes the Presidency, and FIXES THIS! (Just a joke there… Barack will have few options… cut him some slack, people, especially before he is even in office.)