Congratulations to Ben Bernanke for doing the right thing

I have to hand it to Ben Bernanke. He really did the right thing this afternoon with interest rates. I was afraid he would cut them drastically to provide liquidity to the market and give it confidence after yesterday's 500-point decline. But I think that move would have been absolutely wrong. That's because it would have signaled Fed panic and would have provided no benefit for the real problems facing financial institutions.

Since he's cut rates from 5.25% to 2%, things have not gotten better in the credit markets. Instead, the rate cuts have had negative unintended consequences. The lower rates spurred inflation -- particularly in commodities. That's because speculators bought dollar-denominated commodities like oil and shorted the dollar to take advantage of inflationary expectations.

Unfortunately, these higher commodity prices squeezed middle class consumers whose spending makes up 70% of GDP growth. With declining incomes and higher costs, those consumers were being squeezed. That translated into slower growth and put pressure on companies to cut costs by laying people off. Needless to say, an unemployed worker has even less money to spend. This means even slower growth, more layoffs, and less consumer spending -- a vicious downward spiral..