I say it is welcome news, neccesary, helpful, but not a cure.
In regards to how the interest rate changes would help, I will post what I put int he Recession thread:
They drop the interest rate in an attempt to increase aggregate demand (increase consumer spending b/c people pay less interest and feel wealthier, business investment as businesses can increase leverage, exports via a lower dollar). This is a tool to manage an economy and stop it from slowing down to the point where it becomes negative (recession).
The one thing that is scaring everybody though is that it can result in inflation, as essentially there will be more money chasing the same number of products out there - which leads to higher prices. This fear is brought up by those that say we are in inflationary times already if we look at the price of oil and food.
In this regard, I think this inflation metric is now skewed in this day and age, as oil is not a commodity and since food has been used for energy, we are changing the inherent "use" of the product for which inflation was derived.
So good for the cut. It is needed and is a basic tool.
Heck, I think most of this recent crash was started because of good ol' George W. Bush thinking he can play the Fed and fix things. When he stated that their government would change their fiscal policy, the rest of the world showed how much faith they have in him by dumping. Essentially saying that "if that lunkhead thinks there may actually be a problem in America, then f-it, we are out of here cause that means 1) it is actually really bad and 2) we have no faith in his ability to help."
The Fed though is respected and by putting this through quickly they show they are nimble enough to respond to any "emergencies".
Essentially the cut just helps create a floor, and reassures investors. It softens the landing, and positions the economy for a recovery - though recession could still occur these monetary tools (Keynsian, no?) are there to help, not to be a cure.
Is this a panic move? No. Everyone knew already that the Fed was going to cut .5% next week. So this was already priced in. About 25% of investors thought that the movement was going to be .75%.
They moved quicker and sooner, but inline with their statements and market expectations - so I don't see it as "drastic". Hell, if George didn't open his untrustworthy yap last week the Fed may have been able to wait until their meeting next week.
This is a normal economic cycle. While shtty it is still a fact. Like the tech boom, when things go very well and there is lots of money people become lazy ans stupid. In that case, we had REDICULOUS companies getting IPO'ed and people buying shares. In this case, we have people receiving REDICULOUS mortgages, and general lending out of control to continue the wild ride.
It will take time to correct, and the only way to do so is to continue spur on the ol'bear of an economy until it can start jogging as quick as a bull. Fortunately, the Fed still has room to move/tools-in-their-kit.
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