OK, so let’s get this straight:
Low interest rates and easy money in the States (and Britain, and almost everywhere) led to a crisis in the ‘sub-prime’ mortgage market, which has brought on fears of a recession in the States (and everywhere). The Fed’s response, as Wall Street cottons on to the danger of recession, and tumbles? Lower interest rates by three quarters of a percent, a week early!
Are these people complete imbeciles?
Let’s get the next part of the story straight (i.e. what will happen over the next several months/years):
Eased credit in the States leads to a further bubble in the ‘sub-prime’ mortgage market (and probably also a sudden surge of inflation), which in due course will lead to a still worse crisis, and thus to a real recession…
The U.S. and U.K. nowadays are debt-ridden — debt-sodden, debt-addicted — countries, mortgaged to the hilt. The Fed has just redoubled that. It truly does beggar belief.
We are living beyond our means. It is time to get real. It is time for some thrift. It is time to stop believing that economies can keep growing, and debt keep rising, without a reckoning.
Through what they have done today, the Fed have simply blown a new, bigger bubble that will really bring the whole house of cards tumbling down a little down the line, far worse than if they had done nothing.
Thank God Mervyn King doesn’t seem as much a fool as these fantasists who believe that they can con themselves and everyone else into eternal debt and eternal growth. But when America snots all over the world, as will happen just a little later, we may all yet catch pneumonia.