Consumer borrowing fell for the eighth straight month in September. This record-setting streak is due largely to tightening by lenders, unemployment and the conservative preference to pay down debt rather than spend. This widespread fit of fiscal responsibility, economists fret, could prevent a recovery from taking root, since consumer spending is responsible for 70% of the U.S. economy. This conventional thinking, of course, overlooks the fact that an eventual increase in spending that isn't fueled by consumer spending will yield a recovery that's more likely to last.

According to the Federal Reserve, borrowing fell at an annual rate of $14.8 billion in September -- it's biggest drop since July and much larger than the $10 billion predicted by economists. The behavior is exactly what you'd find in people worried about losing their jobs or focused on rebuilding safety funds and investment portfolios. Those who want to borrow are finding banks won't be complicit this time, as they clamp down on lending practices.

The dollar fell, then firmed, against most of the world's other major currencies Tuesday at mid-day, on word of yet another U.S. government intervention to ease the financial crisis. (For full currency data, click here.)

Still, the more important theme, many economists and analysts agree, is how well the dollar has fared given the remarkable increase in debt by the United States and the supply of dollars globally.

The dollar weakened about one cent to $1.3040 versus the euro and about half a cent to $1.5160 versus the British pound on Tuesday at mid-day, after the U.S. Federal Reserve announced it would buy up to $600 billion in mortgage and mortgage servicer-related debt and up to $200 billion in consumer and small business-backed loans, to free up credit in these sectors. The dollar also fell about one cent to 95.53 versus Japan's yen, and about half a cent to $1.1881 versus the Swiss franc.

Under the new programs announced Tuesday, the U.S. Treasury will provide about $20 billion in credit protection to the U.S. Federal Reserve, using money from the $700 billion Troubled Asset Recovery Program (TARP).

In September, the Fed's balance sheet totaled $924 billion, when the first wave of the financial crisis began to freeze credit markets and decimate stock markets around the world. However, if all loan guarantees are accessed, and if all of the remaining $780 billion debt is added to the Fed's balance sheet, that balance sheet would increase to about $3 trillion.

GMAC, the former lending arm of General Motors Corp. (NYSE: GM) has hedge fund Cerberus as its largest owner. GM still has a piece. Now, the financial firm has begun to undermine the fortunes of the car company that created it to give car loans to its customers.

According to The Wall Street Journal (subscription required), "GMAC LLC, the big home and auto financing company, this week began restricting new loans to the most credit-worthy buyers after an attempt to raise new funds failed. The move threatens to crimp General Motors Corp.'s U.S. sales, forcing the struggling auto maker to push its potential buyers to other lenders." Those "other lenders" are mostly banks, who do not want to give car purchasers any money either.

GMAC's problems are, to a large extent, because of its mortgage lending operation, but that hardly matters to GM, which is losing $1 billion a month on its North American operations. GM's unit sales are running off 20% or better compared with last year.

U.S. Federal Reserve Open Market Committee Member William Poole Wednesday took the highly unusual step of specifying that the Fed will not raise interest rates at the Fed's next meeting in December.

In a speech delivered Wednesday at Marquette University, Poole, a voting member of the FOMC, said, "When the Fed cuts its target for the federal funds rate, market participants know that the FOMC's decision at its next meeting will be either to leave the rate unchanged or to cut further. Barring unusual circumstances, the FOMC would not consider a rate increase just after cutting its Fed Funds rate target."

Poole added: "This approach to policy is appropriate when market conditions are fragile because market participants must be confident that they can take positions without the risk that the Fed might raise rates, which would reduce asset values, in the near term. Investors can then concentrate on determining the fundamental value of risky assets and can work on deals to buy such assets from holders forced to sell by their own impaired liquidity and capital positions."

Fed Analysis: Fed Governor Poole's specific statement that the Fed would not cut interest rates at its next meeting is highly unusual, given the Federal Reserve's ability to influence both market and economic events via monetary policy. The Fed, usually led by the Chairman of the Federal Reserve, almost always uses opaque, highly-qualified language to both not signal its intentions and to not cause large, sudden changes in market valuations. Poole's specific language most likely is an attempt by the Fed to reassure the markets that, barring unusual circumstances, their will not be a "start / stop monetary policy" by the Fed -- i.e. beginning an interest rate reduction policy, then reversing it -- but rather, that the Fed's bias is toward lowering rates to promote stimulus to ensure adequate U.S. GDP growth, and counteract the negative effects of sub-prime mortgage and related bond defaults.

No one ever said serving on the U.S. Federal Reserve Board of Governors was easy. Next Wednesday's Fed meeting may provide a case study regarding just how difficult that job is.

The FOMC, led by Chairman Ben Bernanke, will be asked once again to address the health of the U.S. economy amid two contrasting views of reality. To be sure, different interpretations regarding the U.S. economy is not something the Fed has never encountered: they're the essence of the arena of ideas that flourish in a free society, and part of what makes a market "a market."

The Fed, it seems, is perpetually trying to sift through the arguments (and data) of those who believe inflation is too high and those who believe the U.S. economy is growing too slowly.

Further, setting the appropriate policy would be somewhat easier if the Fed knew that only domestic factors determined either economic condition. But the Fed knows that is not likely the case.

One example: The Fed lowers short-term interest rates, as it did a month ago, to begin to stimulate the slowing U.S. economy, only to find that its counterpart, and the world's second most important central bank, the European Central Bank, is not. Of course, it's clear that the ECB is undertaking the monetary policy appropriate for the euro zone, but it's also clear that the policy hurts the U.S. economy's ability to grow at a time when the Fed is undertaking a policy to achieve that goal.

Another example: Conversely, when the Fed maintains short-term interest rates, as it did last year and early this year to control inflation, China, Asia, and most other emerging market economies continued to increase oil consumption -- a condition that helped push oil above $85 per barrel -- a major contributor to U.S. inflation. True, U.S. oil consumption is per capita the highest in the world, but few would deny that, along with U.S. demand, emerging/international market oil demand is stoking both oil's price and U.S. inflation. In other words, it hurt the Fed's inflation control effort previously, and it's hurting it today.

Fed Analysis: Given current conditions, it's likely the Fed on Wednesday will lower the federal funds rate by another quarter percentage point, to 4.50% from 4.75%. In September, the FOMC surprised most in the financial markets by lowering by one-half percentage point its key lending rate, to 4.75% from 5.25%, the first rate decrease in more than four years.

The monetary policy easing is expected to provide domestic stimulus to help recharge the U.S. economy while not re-stoking domestic inflationary pressures, qualified by the fact that international factors may hinder the Fed's goal.

Last month on BloggingStocks, I wrote about a site that is an absolute must-read before you go and buy a car. Now CNN/Money has a list of their 5 mistakes to avoid when shopping for a car:

• Don't fall in love with a car.
• Avoid super-long car loans.
• Negotiate the price of the car you're buying first ... THEN negotiate the value of your trade-in.
• Avoid negotiating in person.
• Don't get hoodwinked by a sweet deal on the outgoing model year.

To these tips I would add one: Avoid getting a car loan if a loan is necessary. In other words, pick a car that you can afford to pay for with cash. If you can get a super-low interest rate deal, go for it. But pick out your car as though were paying in cash. If you can't afford to pay cash, that means you probably can't afford the car.

I realize that this may stick you in a '95 Pontiac rather than a '05 Porsche, but you'll thank me in the long run. If you ever watch the Can I afford it? segment on the Suze Orman Show, you've noticed that the people with car loans are always the ones in financial trouble.