There's much speculation today about the possibility of yet another interest rate reduction by the Federal Reserve. Some people indicate they think another rate cut would be a good thing. Pardon me while I ask: Are they nuts?

The dollar is already devalued to the point that our trading partners are getting edgy about their export values, and you can forget about foreign investors sticking their money into American companies to help spur development. Low level municipal bond issues could soon become a thing of the past, and that concept of placing money into conventional savings accounts? Yeah okay, I'll get right on that.

Jim Cramer sings a gloom and doom song about 7 million home owners becoming renters, and declares that the nation will be required to swallow $500 billion in losses. He alludes to a wholesale crumbling of major banks. I see no mention in his blog about possible alternate solutions to the trouble that sloppy bankers have caused themselves. Personally, I don't think that ruining the dollar with yet another round of artificially created economic stimulation based on cheap credit is a good long-term solution for our country, although it might allow some of those sloppy bankers another breather before they have to face the music. The thinking that cheap bank credit will help the economy by infusing borrowed money into the stock market and loosening up spending habits is nothing short of a sucker's bet.

Will an interest rate cut by the Fed on Tuesday cause the housing market to change gears? Can a quarter point or even a half point reduction in the base interest rate reinvigorate an economy that's been limping along for the last three quarters? Would our nation's bankers have reason to smile if their cost to borrow declined just a bit?

Don't make me laugh.

At the risk of causing my photo to be placed on a milk carton, I'm going on record as stating my opinion that we need another half point increase in the cost of borrowing in order to gain some manner of control over our current liquidity crisis. This nation's economy is going through something similar to the flight of a flak riddled B52 bomber, on fire with three engines shut down. Yeah, it'll still fly but it's not real graceful and it looks like hell from ground level.

Perhaps keeping interest rates high and tight will place temporary restrictions on overall growth but we need to get a handle on debt and we need to rethink our strategy for maintaining our national economic health. Additionally, when interest rates climb a bit, savings rates climb also as do the activities of foreign investors. Besides, who's calling the current interest rates unacceptable? When I bought my first home, interest rates for a 30-year, fixed-rate home mortgage were running at about 12 percent.

For July, investors withdrew $5.5 billion from domestic equity funds, slightly more than in June, which followed $10 billion of withdrawals in May, according to a memo sent out by Tom McManus of BofA yesterday.

International investing also "screeched to a halt", as the $2.0 billion in weekly inflows into funds outside of the U.S. have stopped.

This morning, short-term lending rates, the rates for financial institutions to do business with each other, shot up in Europe -- another sign of tight money.

Retailers also released generally weak monthly sales data this morning, with a few exceptions.

We blogged yesterday that the Fed's objective is to control the psychology of inflation expectations, it appears from all the points listed above that the Fed has succeeded. Both the ECB and the Fed announced they are adding reserves to the system. Look for short-term rates to start coming down in September.

The Federal Reserve Open Market Committee (FOMC) will announce its decision on interest rates Thursday at the end of a two-day meeting. Although some, including one of my colleagues, believe that the Fed will raise rates (see Sheldon Liber's post, "The Fed may have to raise interest rates") and others believe the Fed may lower rates, I believe it will keep rates on hold for now and for the immediate future. Update: The Fed did, indeed, announce it was keeping rates steady, expressing "some optimism" about a "modest" improvement in core inflation readings.

I think the Fed will mention that core inflation appears to be at the high end of the desired range but is currently under control and emphasize its concern with the spillover effect of higher food and fuel prices on the core rate in the future. This should help it to maintain its credibility as an inflation hawk.

The Fed will discuss the strength of the economy as demonstrated by the low unemployment rate and other economic data but also acknowledge the seriousness of the housing crisis. It will indicate that it does not appear to be spreading to other parts of the economy. This will be necessary to calm Wall Street anxiety that the Fed is not vigilant in preventing a recession.

China is currently taking a sledgehammer to its economy in an attempt to slowdown growth. On Friday, China officials announced it was hiking short-term rates, increasing the required reserves banks maintain on loans and increasing the band on its currency to let it further appreciate. All powerful tools to halt money supply growth.

These steps follow news reports this week that one of China's more respected entrepreneurs said the Chinese stock market is a bubble. We blogged a few weeks back that Chinese retail investors opened more than one million stock trading accounts in one week and over 10 million the last four months -- greater than the previous four years combined.

Currency appreciation during the short-term always adds more fuel to the fire. As Chinese investors expect the yuan to appreciate, they will convert their massive hoard of US dollars to yuan and then most likely look for additional profits in the stock market. This always ends ugly when the central back finally succeeds at sucking enough money out of the economy and then the market will have a serious correction.

I'd stay away from Chinese stocks. China hosts the Olympics in 2008 and does not want a bubble economy when the world shows up. Stick with the mature economies for now.

I have insurance today (thanks to my wonderful employer, oh how I adore you), but for three years my family went without. I was laid off, and we did the math: it was far cheaper to pay out-of-pocket for our two boys' well-baby visits to the pediatrician and the occasional prescription than to pay the $400 monthly it would have cost for insurance for our young, healthy, non-smoking family.

And we're not the only ones. Every year, millions more families are going without health insurance. The reason? Health insurance rates are growing at a startling pace double that of inflation. It's not just the unemployed, or workers whose employers don't provide benefits, who are feeling the burn; as employers' rates rise, the contribution paid by the employee inches up, as well -- and the average annual raise won't cover it.

Every year, then, take-home pay goes down for me, for millions like me; for the rank and file at the 61% (in fact) of employers who offer health benefits.

Even so, the DJIA is nearing all-time highs, the market seems to be buoyed by an unknown giddiness. What's going on? Is the fat-and-happiness of the health insurance industry spilling over into consumer confidence? Is it just that we're really happy this is an election year? That doesn't satisfy me, and our Canadian friends can only look on in mystified horror as they watch our paychecks get frittered away into the insurance company's pockets.

As I see it, we have a couple of options: (a) buy insurance stocks and hope that some of the profit will end up in my retirement account instead of in the companies' executive pockets; (b) elect officials who'll effect some real change and democratize healthcare; or (c) move to Canada. Which will it be for you?