The Fed’s action, lowering short-term rates to 2 percent from 2.25 percent, followed new indications that the American economy remained fragile, expanding by 0.6 percent on an annualized basis in the first quarter, not an overall downturn that would have indicated a full recession had begun.
The poor record of economic growth, reported by the Commerce Department on Wednesday morning, reflected what most Americans have been experiencing since late last year — declines in consumer spending, housing prices and business investment, along with spreading unemployment.

Wall Street gave up sharp gains after the Federal Reserve announcement. The Dow Jones industrial average, which was up about 120 points and moved higher after the announcement, was up less than 30 points about an hour later.

Wednesday’s interest rate action was accompanied by a parallel decision to lower the Fed’s discount rate, the rate the Fed charges banks and thrift institutions, from 2.50 percent to 2.25 percent.


I sense fear on the streets. I certainly see fear all around me in stores, at gas stations, in the schools, everywhere, people notice inflation is eating away at our precious funds. They know deep down, that the present 2% rate of the Fed is utterly, totally insane and will only make inflation worse. The older people my age and older know perfectly well, what the cure is. But people hate this and want free Funny Money™. People who are savers are hoping Volcker will throw Bernanke from a helicopter, take over and repeat what he did in the past. Buying bonds that have an 18% return is GREAT if one is a saver! Right now, savings are collapsing since one makes more money by borrowing rather than saving.


NYT:

“My view is that the Fed is back doing the silly things it did in the 1970s, of trying to make judgments that have long-term consequences based on short-term data,” said Allan H. Meltzer, professor of political economy at Carnegie Mellon University. “It should get back to the period of 1985 to 2003 known as the Great Moderation.”
The Fed’s recent move, coupled with the uncertain performance of the economy, appeared likely to deepen the partisan impasse in Washington over how to respond to joblessness, the mortgage crisis, energy costs and other problems.


Meltzer is like Volcker: he remembers things. He knows better. He can read graphs. He can grasp reality. Bravo. I am glad the Times is quoting people like these two. By the way, the 1985-2003 period was NOT moderate at all. It saw our economic state collapse! GAH! Why can't they see the obvious? Why? Why???


The US trade deficit grew worse and worse. The budget deficit went from $1 trillion to $6 trillion during that time. Interest rates moderated because we stopped inflation via the method of OUTSOURCING AND OFFSHORING our economy! And even with all this, the US had to devalue the dollar via the Plaza Accords and the Louver Accords.


First: the numbers above are riddled with lies, evasions and fraud. The main thing is, we are in the red. And there is no end to the foolish choices being made from top to bottom.