The Federal Reserve cut the federal funds rate — its “big deal” interest rate — by another 3/4 of a percentage point this afternoon, bringing the number down to 2.25%. This is the second 3/4-point cut in recent months, meaning Ben Bernanke is probably on speed since that is a lot to cut.
Some were even expecting a full percentage point decrease, so if the Fed had come to its senses during the meeting and announced a mere 1/2-point cut, Wall Street would have collapsed due to sadness.
These rate cuts do nothing to stop bad loans. The inflation-adjusted “real” rate is now below zero percent. There is going to be some bubble in some other sector; the dollar will be worth less than the intrinsic value of a penny; and we will all remain homeless. Welcome to the American economy. Run. [NYT]