The FED: How Low Can You Go ??

The Federal Reserve is expected to lower interest rates to 100 basis points (1%) !!!
Has the Federal Reserve ever heard of a country called “ Japan “ Golden Boy of the 80’s, slump king for the next two decades.

The Feds want to lower rates to 1% this early in the financial crisis ? Interest rates are one of the “few” tools they have to use, and taking rates down to 1% so early in this crisis is utterly incompetent. Japan’s Central Bank tried the same tricks early on in their housing bubble collapse- and learned that when the economy is going downhill- banks won’t lend and people and business DON”T borrow !! Japan’s central bank took rates to ZERO and still there was no uplift in the Japanese economy. The same result will occur in America and the world, even at 1% people and businesses are not going to borrow money to expand in a shrinking economy.

As LNR has repeatedly stated, the government now needs to spend massively- including taking 25-30% from the defense budget to hire millions of workers, many can be put to work on badly needed infrastructure projects. By keeping employment up- people will regain confidence and begin spending again- that is the natural cycle which will lead to a quicker recovery and prevent a long recessionary bottom.