Dollar Death and the Fed
What is the Fed thinking! They just cut the Fed Funds rate .5% under the guise of avoiding another recession. The obvious lie that this move signals is shocking. Lowering the short end of the yield curve (interest rates) only serves to help big banks and businesses who have already unfairly made fortunes taking on sub prime loans and suckering less than credit worthy Americans into risky home loans. This move is a band-aid which only alleviates the short term borrowing troubles of these large lenders.
For the uninitiated - these lenders borrow short term and lend long term. When short rates go up their profits get squeezed. So lowering short rates gives these lenders a relief. But in fact a free market should allow these rates to float naturally to alleviate any imbalances in our money markets. Short term lenders who haven’t protected themselves SHOULD be going bankrupt.
Lowering short rates not only serves to protect these lenders but it has an added kick in that it forces the dollar exchange rate to collapse against world currencies which in turn forces bond holders to sell their Treasury bonds in search of higher yield… and when treasuries sell off, long term rates go up. Who suffers when long rates go up? Individual homeowners holding adjustable mortgages when their loans readjust at higher rates!
So help out big business and continue to screw the man on the street who doesn’t know any better. Then blame all our problems on the Democrats once they take back the White House. Good Plan!
As Witzy is fond of saying. “Can I get a bail out and a side order of cash!”