Bernanke: ‘Pushing On a String’

Cross-posted on Stock Picks Bob’s Advice, Trading Goddess, and John Kerry for President 2008:

I join with other investors in disappointment of seeing a 1/4% drop in the Fed Discount Rate.

The market didn’t like it and turned from about a 50 point gain in the Dow to a 220 point loss. And the market has another hour to trade.

But what can Bernanke do? Rate cuts drive the dollar down in value. And raise the risk of inflation as imported products climb in price.

The interest rate supports the value of the dollar which has plunged approximately 44% against the Euro in the past 7 years under President Bush’s leadership. 5-Yr $-Euro Chart:

dollareurochart121107.png

That means that in a global economy, the value of everything we own has been devalued by about 1/2. When we travel abroad, we can see the effect of the weak dollar when it takes $5 to buy a Coke in Italy.

With the subprime mortgage mess unraveling and the derivatives and hedge funds shenanigans continuing to come to light, our economy needs a stimulus like a rate cut. But if we fail to support the dollar, the Chinese are likely to resist continuing to fund our debt instead turning to Euro-backed securities and the OPEC folks are likely to once again consider pricing oil in Euros and not dollars.

I am greatly concerned for our economic vitality and prosperity.

We have unfortunately continued to be led by politicians who subscribe to the Grover Norquist pledge of ‘no new taxes’. Why ‘taxes are bad–aren’t they?’

But can we continue to cut taxes and pour money and resources into military activity without paying the piper somehow? Should we really believe that tax cuts are essential to grow the economy when this endless printing of dollars in terms of an expanding budget deficit is a threat to our well-being.

Should we be concerned about the ever-growing disparity between the wealthy and the poor?

Even Henry Ford knew he needed to pay workers enough so they could buy a Model T.

We cannot depend solely on high-end retailers catering to the wealthy to sustain this economy.

Balancing the budget needs to be a national priority. Tax policy must not work to encourage the continued outsourcing of quality jobs overseas. Efforts to repeal the Estate Tax will only insure more of a continued Plutocracy in America with the wealthy getting richer and the poor poorer and our economy will suffer. Cuts to education will not help the poor rise up out of their economic morass.

This country has been headed in the wrong direction under this President and we are all paying the piper.

Bob

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About Robert Freedland

A concerned American and supporter of Senator John Kerry, I am the author of the blog "John Kerry for President 2008". I am also the author of the stock market investing blog, "Stock Picks Bob's Advice".
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2 Responses to Bernanke: ‘Pushing On a String’

  1. ironxl84 says:

    This is simply the tip of the iceberg.

    What lies ahead is nothing short of financial chaos and ruin if the present course is maintained.

    These things that most take for granted – like the Federal Reserve and the National Debt – are more like theatre of the absurd. Unfortunately, this is far, far from a comedy.

    Congress creates the “Federal Reserve” in 1913, which enables a consortium of International Bankers to print “money” out of thin air, and then “lend” it to the US Treasury with Interest.

    In turn, US Citizens are taxed to pay for the “Interest” on the “Debt”.

    Meanwhile, like Jabba the Hut, the Federal Reserve inflates and deflates in cycles via Interest Rate adjustments, creating “Credit” and then reining it in.

    And with each passing cycle, the Federal Reserve robs true wealth from everyone as it tranfers hard assets to it’s coffers, in exchange for it’s creation of “Credit”.

    Say what you will about Ron Paul.

    At least he recognizes this vicious pattern – and is willing to fight it – not unlike David and Goliath.

    Tom

    With each of these cycles

  2. Hi Bob!

    Thank you for the post, as well as the mention. It is appreciated! 🙂

    Keep up the good work you do!