Political Bloviation

Fed Makes Emergency 0.75% Rate Cut - New York Times

And the NYSE responds by opening 400 points lower

There’s a profound fear of recession in the air. American consumption is the engine that drives much of the global economy, when US consumers cut back on purchases business across the world suffer. When the Fed makes the biggest rate cut in 24 years and it doesn’t make a dent in NYSE losses, there’s a problem. The real question is it a problem of perception or of economic fundamentals? I’m interested in hearing what economists will have to say about the situation.

We have a credit crisis caused by speculation and inadequate oversight. We have a weakening dollar. We have jumps in measures of transportation and energy costs that may reflect inflationary pressures that may be exacerbated by the latest Fed rate drop. We have drops in new construction starts, both month to month (Nov to Dec) and compared to Dec of 2006. It doesn’t look good.

UPDATE:

Sharp gains from the European banking sector on Tuesday, supported shares in a volatile session marked by the largest inter-meeting interest rate cut from the Federal Reserve for many years.

The pan-European Dow Jones Stoxx 600 index (SXXP) edged up 0.7% to 311.06 in afternoon trading behind large gains from the banking sector.

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