Bernake: The Dollar Destoyer!

So the word on the street today is the Fed may once again reduce rates. Earthlings have become so scared of a recession that they are willing to destroy the value of the dollar to just delay the inevitable. Look, like it or not we are going into a recession. Short sited Earth bankers and borrowers were willing to lend money to any homo-sapien that could fog a mirror and they are just afraid to let banks pay the consequences. Where are the Milton Friedman lasse faire economists? Why are they so afraid to let the foolish businessmen take their lumps (Ferengi are not responsible for the stupidity of other races)? New financial leaders will rise out of the ashes and they will be all the wiser because of it.

The Ferengi watched in admiration of President Ronald Regan and his understanding of a strong dollar policy, "The Dollar will be as good as gold" was the cry then. Aren't all these FOMC people suppose to be your so called Regan Republicans? Why are they so willing to let the dollar die on the vine?

Money in the currency market flows to the country that is usually paying the best savings rates. The US was the envy of the world and the dollar was strong all through the 80-90s, the strong dollar policy helped the US lead the world in development and strength. Every time Bernake seeks to lower the interest rate to cave to Wall Street traders he further weakens the dollar. Interest Rates are still at very historical lows, maintaining the current rate will at least help to stabilize the dollar. There is no cure for the housing market just give it up already. Let the market shake out and run its course.

In 1929 where we faced similar economic issues and the Fed increase the interest rates in order to strengthen the dollar and combat inflation but then sparked the worst sell off in the stock market. In 1998 the Fed had a similar liquidity crisis thanks to the "genius" of Long-Term Capital Management and all the banks that lent them money. The Fed increased liquidity by lower interest rates at the time to bail the banks out, but the dropping commodity market and deflation made the economic situation favorable for the time and the cuts didn't hurt. This time we are in a harder situation because earth has a liquidity issue created once again by the ridiculous bankers lending for any reason, but the cutting of the interest rates is perpetuating inflation and an already bullish commodity market. Raising interest rates to combat the inflation may put us into 1929 decline but lowering the rates puts into 1970s type inflation. The only logical course from my point of view is to just leave the rates alone. Quit tinkering with it. Allow this economy to play its way out.

Bernake believes that the rest of the world is going to eventually fall into recession just like the US so the rate cuts will eventually be countered by the cuts in other countries. The world is bigger than it used to be. New large consumers like China and India may not bring the kind of slow down we expect. Countries like Canada, Mexico, Australia, and Russia who are profiting from the skyrocketing commodity prices and may make up much of the consumption the US will slack off on because wealth is increasing in those areas. Bernake may very well be right but it seems to me he is spinning the revolver with a few extra rounds.