Fed cuts rates again in bid to stave off recession – Jan. 30, 2008

Well, the Fed went ahead and met the market’s demands by lower their target fed funds rate another 50 basis points. I think this is a viable short-term strategy but I fear that there will be long-term ramifications, the first of which is inflation may rear its slightly less-ugly-than-losing-your-job head.

Second, reducing rates this late in the game will have the same effect as it did last time: Fueling a speculative bubble. Question is, what bubble will blow up this time around? People loathe real estate, the stock market looks very iffy, bonds may have made their run up…gold?

Nope, commodities. I’m no expert on commodities, but there’s no doubt in my mind that as pricing pressure increases due to higher input costs (oil) and higher demand (more money to spend), prices on things such as precious metals, livestock, and food, among others, will rise, perhaps quite drastically. Couple those things with the typical bad news winter brings for fruit, and you can bet your bottom dollar the price of orange juice will skyrocket.

But, as Keynes said, “In the long run, we’re all dead.”

Long live short-sightedness!!!

Fed cuts rates again in bid to stave off recession


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