The Fed Cut Is Like Gum On A Leaking Dam

Charanwadidam
The Federal Reserve slashed short-term interest rates this week, and I think that’s a bad move.  I’m no economist and I’m open to what your opinion is on this topic, but here’s my thought …

We keep sitting around, moaning that the economy is a mess and the housing sector is in turmoil.  True?  I don’t think the ecoThekissnomy is a mess, personally, but the housing sector IS in turmoil and part of the problem is the banks.  Bad loans have been at the root of the problem for several years now, and homeowners are scrambling as their Adjustable Rate Mortgages are doing just that, adjusting, and they’re unable to pay their bills.  The Fed cut helps them in the short-term, and there’s celebration in the streets.

Unfortunately, it seems to me that this is a short-term gain and ignores the root of the problem.  We keep overleveraging ourselves, and we’re weakening our dollar.  A rate cut eases the short-term financial situation of many individuals, but a rate cut also weakens our dollar with the rest of the world.  Why don’t we clean up the larger problems, like predatory lending and irresponsibility with personal and business credit?  I’m no wizard when it comes to money, folks, so I’m talking to myself, just as much as I’m talking to you.  What happened to personal responsibility?  I just don’t see how continual rate cuts are good for the economy in the long-term, and I’d welcome the thouGumshoebgghts of those much smarter than I. 

It just seems to me like the dam’s still gonna burst. 

4 thoughts on “The Fed Cut Is Like Gum On A Leaking Dam

  1. Darla

    Jeremy,

    I agree with Jeff Brown, but on a more general, “big picture” level. Throughout our economic history, we have experienced what I believe are necessary crashes in the system. Call it recession, depression, or whatever you want, but our economy gets so overfed in the fat times that we need the slowdowns to level things out again. This is just another economic slowdown to bring things to the level where they SHOULD be, and where they make sense. When all of the major players – real estate, stock market, finance, corporations, employment gurus – are crying about the state of things, then you know we are adjusting as we should. A nice leveling stock market crash (like the one in October 1987) is one sign I look for to indicate that we have reached a more realistic place, economically. And then, of course, the cycle of fattening up will begin again; this IS America after all. The reality is that average folks in this country are used to rolling with the changes, and will continue to do so.

  2. Darla

    Jeremy,
    I agree with Jeff Brown, but on a more general, “big picture” level. Throughout our economic history, we have experienced what I believe are necessary crashes in the system. Call it recession, depression, or whatever you want, but our economy gets so overfed in the fat times that we need the slowdowns to level things out again. This is just another economic slowdown to bring things to the level where they SHOULD be, and where they make sense. When all of the major players – real estate, stock market, finance, corporations, employment gurus – are crying about the state of things, then you know we are adjusting as we should. A nice leveling stock market crash (like the one in October 1987) is one sign I look for to indicate that we have reached a more realistic place, economically. And then, of course, the cycle of fattening up will begin again; this IS America after all. The reality is that average folks in this country are used to rolling with the changes, and will continue to do so.

  3. Jeff Brown

    Jeremy — You make a well founded point. However, there’s an underlying premise which could be, and in my opinion, is false.

    Here it is: The falling dollar is a very bad thing.

    Frankly, I’ve suspected for some time now, that the White House and Bernanke are in agreement — a weak dollar is ultimately great for the U.S. Why?

    This is because the rest of the world, and Europe is one of the largest benefactors, have been banking profits on their products for years, because of the strong dollars. Meanwhile, OUR higher quality products languish.

    The turnaround is already in evidence, as many of the pompous European economic leaders are beginning to complain publicly about the loss of business.

    This will result in more exports for us, more job creation, and more profits to be reinvested — which will reinvigorate the cycle.

    It’s about time the cheap crud produced by so many countries is forced to compete with the far higher quality of our guys’ work.

    Only time will tell.

  4. Jeff Brown

    Jeremy — You make a well founded point. However, there’s an underlying premise which could be, and in my opinion, is false.
    Here it is: The falling dollar is a very bad thing.
    Frankly, I’ve suspected for some time now, that the White House and Bernanke are in agreement — a weak dollar is ultimately great for the U.S. Why?
    This is because the rest of the world, and Europe is one of the largest benefactors, have been banking profits on their products for years, because of the strong dollars. Meanwhile, OUR higher quality products languish.
    The turnaround is already in evidence, as many of the pompous European economic leaders are beginning to complain publicly about the loss of business.
    This will result in more exports for us, more job creation, and more profits to be reinvested — which will reinvigorate the cycle.
    It’s about time the cheap crud produced by so many countries is forced to compete with the far higher quality of our guys’ work.
    Only time will tell.

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