Wednesday, 17 December 2008

May you live in interesting times

with apologies for the pun...

The Fed has just announced that their key interest rate will fall to 0.25%. This is effectively zero. They are now spending money to buy up poisoned assets and their own bonds. What does this mean?

They are panicking

And who can blame them! They, along with the majority of the observers and participants, believe that we are headed for a recession, and are terrified of deflation. As I said in an earlier post, they are effectively printing money. Since they do not really have a clue about what will happen, they are running an experiment with the world-wide economy.

There is good news

But not a lot. A commentator on Radio 4's Today show this morning was talking about nationalising all the banks and scrapping Fraction Reserve Banking. So the good news is that people are talking about the alternatives to the status quo. The problem is that those making the decisions are going to be in a hurry. As outlined in my previous post this is not a good place to be. You worry when our leaders are probably spending less time thinking through the future of the global economic system than where they are going to retire to.

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