Enough already -- leave something in the tank for next time!When the Federal Reserve Board meets on Wednesday they should leave interest rates where they stand. The lack of liquidity in the market place is not coming from high interest rates. It is coming from a de-leveraging of the economy.
The Federal Discount Rate currently is 1.75% and was 2.25% less than a month ago. Alan Greenspan was too quick to lower the rates before and too slow to raise them when he should have. Ben Bernanke was too slow to lower them this time around and I do not want him to be too hasty to lower them further now when he should take a breath.
We're all rooting for you, Ben (what choice do we have?), so deal with the cash sitting on the Treasury's desk now and get back to this interest rate issue next month. Let the European banks lower their rates. That will strengthen the dollar and might help to stabilize oil prices, which have been dropping rapidly. Lower oil prices will put billions of dollars back into consumer hands and the overall economy. Lower oil prices will do more good than lower interest rates.
We need stability! We need predictability! Part of the reason we got into this mess was cheap credit and poor foresight on the part of the government, investors, and lenders.
Take a breath, Ben. Let's see the results of throwing hundreds of billions, even trillions of dollars, at our economic woes before we go down some dark alley where we just got beat up only a short time ago.
In some ways it seems we have already lowered interest rates down to zero. We are printing money so fast we might run out of paper, ink or even electronic bytes when the power goes out because we can't pay our bills.
If only we could convert the hot air that comes out of Washington into a useful energy source.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.
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Reader Comments (Page 1 of 1)
10-28-2008 @ 4:55PM
william lindblad said...
I agree, at least in part on all points however, I doubt that the Fed will remain in a static position. Today's market rally is a precursor to expectations - and those expectations are that of a 50 basis point cut. So far Ben has been a puppet to Wall St. and it would surprise many to see a logical approach come into play. Yes, the price at the pump will do much in the positive, but it has to reflect the wholesale price relative to retail which remains months away. Not only was our government slow to react those of many nations are in the same predicament with the result being world wide economic problems. The damage is extensive and no amount of stock market rally will prove a quick fix. Trade works on consumers and much better when they are optimistic.
The banks don't know when to quit and are presently working on exacerbating their own creation. Raising rates on lending, new ATM fees, new credit card charges and any other method to try to recoup losses are now becoming part of our financial system. It's a fools paradise and until both government and the financial system wakes up to the fact that they require solid investment and consumers that are not afraid to engage in trade and lending for fear of underhanded tactics, conditions will remain in the negative much longer.
In short, confidence has to be restored and the banking system needs a bit, bridle and someone pulling the reins. Personally, I think some of the leaders of this area should be breaking rocks.
10-28-2008 @ 8:04PM
Janusz said...
Interest should go higher.This is why we are in recession.Is time to make US $ stronger, so the US coutry will be stronger.Our export quality products also will be better.
Janusz
10-29-2008 @ 7:17AM
paschal said...
for a change the Fed should lead and not follow wall street. Cutting rates does not help the majority of the people. Interest rates on saving accounts gets lower and people on fixed income, who rely on their saving suffer. For once, BEN, show some back bone and hold the discount rate to its present level.
10-29-2008 @ 11:45AM
Margaret Opine said...
I like the way this reads and I'm not so market savvy. I was at the top of the heap with everyone else Oct, 2007 and I didn't move to cash and my numbers dropped plenty in one year. Now here is Oct again. If the market rebound my dropped numbers will go back up as if though all this hell never happened. It would be like a bad dream. But dreams are not going to fix this. If the feds lower the rate, like a jump start on a car motor, and let it run for a bit, then the fed is to ease the rates up because the drop was only a quick start. If the motor does not run on its own after a quick start we know the car has another problem that needs fixing. We don't leave the jump on the battery. We either buy a new battery or fix some electric short in the system, something. But we don't hold the jump to the cable indefinitely. It was just a jump start, like the heart machine. Then, the thing has to run on its on or it has to be fixed otherwise. (These examples of "quick start" are everywhere.)
I like the way this article reads.
10-29-2008 @ 12:58PM
Larry Saltzman said...
The Fed should realize that excessive interest rates cuts are destroying the retirement income of prudent Americans who saved their money and didn't speculate in risky stocks. They will soon be earning zero interest on their money.