The battle over what the Fed should do with interest rates is hardly over. According to Bloomberg, "The Federal Reserve shouldn't wait for housing and financial markets to stabilize before it begins raising interest rates, central bank policy maker Gary Stern said."
In other words, forget the recession. Inflation is the real enemy.
Mr. Stern would like to kill the consumer in the process of trying to save him. The Fed may move up interest rates, but, because the cost of food and oil are global problems, there is little reason to believe that the agency can do much to have an impact on issues that have most of their origin beyond U.S. borders.
Recession is another matter. A large drop in interest rates could help the consumer with a multitude of debts from his mortgage to his credit cards.
Raising rates is move that is 180 degrees in the wrong direction.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
7-20-2008 @ 11:48AM
sonnype said...
The only way to get credit card interest rates down is for congress to pass a law limitring the interest rate that credit card companies can charge.Lower interest rates by the Fed has not lowered credir card rates and the hige rates will cause more consummers to default on their payments and thus cause another crisis in the financial industry.
7-20-2008 @ 2:25PM
william lindblad said...
The main reason for a 1/4 point hike is psychological and it was the point that lacking in Bernanke's Monday testimony. This is a"spin" or "damage control" move. The main reason behind all is that the government needs to KEEP THE MARKET STEADY at all and any cost.
A 1/4 point hike will do nothing for inflation and it will do nothing to increase the credit crunch. The only real effect that it would have is mental. The item that was missed on Monday was that there was nothing discussed that would impact the dollar/euro disparity. They succeeded in getting the banks and lenders stocks stable and oil also retreated. The missing element was the dollar and addressing that, would push oil even lower.
This is all a general snow job, but I do hope it works.
7-20-2008 @ 7:04PM
Jack Roth said...
I feel like I have been cheated. I have worked hard all of my life, driven a small fuel efficient vehicle, and saved and paid off all of my debts and now the value of my properties are eroding and the value of my dollar is eroding due to a bail out of people who were not frugal as I was.
I welcome an increase in the fed rate to help stabilize my falling dollar.
7-20-2008 @ 7:48PM
Eric Harris said...
I have to agree with Jack Roth. Our country is in recession because both too many consumers, and our government, only know how to spend money and not conserve it. We, like parasites, depend on a host body to supply us with life giving nutriments, namely their money. It is time for us to pay the piper and live within our means. Those of us who have been frugal, saved money from their income and paid off their major long term debts should not be penalized by a majority with the credo " I must have it now and will figure out how to pay for it later" attitude. Inflation, not the recession is now our biggest problem and only raising interest rates which will attract foreign investments will save us. Simple inflation can so easily lead to hyper-inflation and that will send this great country into anarchy.