Why the Fed can't save us

Why the Fed can't save us

money.cnn.com

NEW YORK (Fortune) -- Forget all those rational explanations about why foreign stocks markets, especially in Asia, have been melting down for two days. Despite what you've read, seen and heard, those declines weren't caused by fears of what a recession in the U.S. would do to the profits of companies whose stocks trade in places like India, China and Russia.

Rather, the meltdowns were flat-out market panics, where rationality gets tossed out the window as everyone tries to head for the door at once and gets trampled. Go-go markets, especially in Asia, had risen to ridiculous heights - they were going up because they were going up, and momentum fed on itself. Now, they're going down because they're going down, and momentum is feeding on itself again.

The fact that the Federal Reserve Board announced an emergency cut of 0.75 percent in short-term rates shows that the Fed thinks the problem is a market panic rather than economic fundamentals. Normally, the Fed would have waited until mid-day next Tuesday - the second day of its scheduled two-day meeting - to announce a rate cut. Announcing an out-of-schedule cut today before the stock market opened shows that its motivation is to calm the markets rather than to reinvigorate the U.S. economy.

Here's why. First, it won't be clear until the summer whether a recession is in fact underway in the U.S. Even though the nation's economy seems likely to have shrunk in December, there's no such thing as a one-month recession. "A recession is a significant decline in economic activity spread across the economy, lasting more than a few months," (my italics) according to the definitive authorities on such things, the business cycle dating committee of the National Bureau of Economic Research.

Second, even if you believe that the Fed's cut in short-term rates will stimulate the economy, that won't happen overnight. If you took a Fed economist out for a few drinks and promised not to quote him, he'd tell you that the benefits of a cut take at least six months to percolate through the economy. There have been market panics and freeze-ups all over the world since last summer, when the junk mortgage meltdown in the U.S. started gathering speed. These have been confined mostly to the debt markets, which - unlike the Dow Industrials - don't resonate with most people and can't be summed up neatly in one familiar number, as the Dow is.

(visit the link for the full news article)

The fed system is LONG past due for an overhaul. The system is beyond broken, and it is screwing our entire nation, save for a few at the very top. We need to change things in a big way.

money.cnn.com
(visit the link for the full news article)

I have also read that the real reason for the U.S. economy tanking is because the rest of the world has lost faith in the dollar. This makes sense to me, rather than people panicking for no good reason. (As the article says).

obviously the only one who can save us is ron paul

So is this going to be another self-fulfilled prophecy? Whether the market is bound to collapse or not, people freaking out is what will cause the collapse right?

You know......dont misunderstand my post here. Im not claiming to have knowledge that is above all but seriously how come no one in any of these threads about the economy mentions the fact that the entire country AS A WHOLE is in debt to a creditor known as the federal reserve and the central banking system? It goes beyond fixing rates and paying with economical controls because the national deficit is around 4trillion and rising!!! People havent lost faith in the dollar....they know its worth nothing outside this country in reality because the money is printed by the creditor we OWE and is backed by nothing more than accounting entries. They knew that all of this will happen because it isnt cyclical.....well, at least the real problems arent cyclical since inflation is actually caused inentionally by the central banking system. They do this so that they can control the currency which by default places a control on the people who use it. ALso lets not forget that our constitution has been invlaid since 1933 when the country actually filed bankruptcy and had to start borrowing money from a bank....guess which one? THE FEDERAL RESERVE....there is nothing federal about it. Yea sure....government apointed officials sit on the board but they dont own the damn company!! Thats all it is....another bank, and they own you, your house and your lawn becasue your rights as citizens are leveraged against the national debt to that bank!!!

This is the truth people....it has been substantiated througout history that the deficit is running away from us. THis was proven by the grace commission in 1984 and nothing has been done about it. WAKE UP EVERYONE!!!!!! Economics class is @%#@%^@$#%&@#$%!!! It is indoctrinating you to learn how to perpetuate the system it supports. WE all need to get out of debt but how can you expect individuals to do so when they are in a country that owe's more than everyone can muster up in their bank accounts?