As I predicted, along with many others, the Fed decreased the interest rates for the nation's banking system yesterday in order to increase the amount of money circulating in the economy. Both the Fed Funds and Discount window saw their rates decreased by 50 basis points to 4.75% and 5.25%.
A rising tide lifts all ships and that is the thinking behind increasing the money supply. It doesn't directly address the credit problem but the rate cut should stabilize housing prices and help the ratings of those mortgage bonds that now underly the credit system for the derivatives markets.
Lower interest rates weaken the dollar and it was no surprise that crude hit record highs above $80 a barrel. All those Toyotas and Nintendo Wiis got a little more expensive as well.
The high energy prices means that the US will go screaming into a future of alternative energy sources.
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