http://www.washingtonpost.com/wp-dyn/content/article/2008/01/22/AR2008012200518.html?referrer=email
The Fed cut the federal funds rate, the rate at which banks lend to each other,
to 3.5 percent, from 4.25 percent. The last time it cut rates that much was
1984. In its most recent surprise rate cut, following the Sept 11, 2001,
terrorist attacks, it cut the rate by half a point.
At the White House this afternoon, President Bush met with congressional
leaders from both parties, saying he is confident that an economic stimulus
package can be approved quickly that would fend off a recession.
So, which came first, the drop in global markets or the economic stimulus
package announcement? Obviously, the announcement of the stimulus package came
first. The news on Subprime Lending is over three months old, so it did not
come from that. The news that there would be a stimulus package seems to have
affected the markets almost as much as the 9/11 Attack.
So, what could the tie-in be? The government is always in competition with
business for loans. That means to when the government has to borrow money for a
stimulus package, there is less money for the businesses to borrow. Without
being able to borrow, business does not maintain the means of production, much
less expand it.
If the prices for foreign crude made us vulnerable, the announcement of a
stimulus package put us over the the edge. The Democrats are rejecting the
possibility of tax rebates and going for road and bridge construction.
So, forget about paying off your credit card debt or catching up on your
mortgage payment. The prevailing opinion of the Democrats is you would spend it
on Chinese big/flat screen TVs. That was, at least, the opinion of Senator
Wyden from Oregon in the Senate Committee planning the stimulus package.
Meanwhile, there will be nothing done to reduce the cost of government from 19%
of the gross national product. We will not lower spending and we will not
encourage the expansion of the means of production that will pay for spending.
The inherent vice of capitalism is the unequal sharing of blessings; the
inherent virtue of socialism is the equal sharing of miseries. -- Winston
Churchill
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