Wednesday, December 17, 2008

Burning down the house to get rid of the termite problem

We ordinary Janes and Joes rely on experts. We get sick, we go to the doctor. The doctor graduated from med school and passed difficult boards, so presumably, he or she knows way more about what's wrong with us than we do. So we trust the doctor. We take the medicine or have the surgery. Whatever you say, Doc. We trust the expert.

Our economy appears to be in the crapper. So what do we know? We're just average Janes and Joes, going to work, putting our paychecks in the bank, buying the occasional stock, mutual fund, cd, paying our mortgages, bills, credit cards. We trust in our government. We trust in the economic experts.

What the _______ was the Federal reserve thinking yesterday when they dropped the Fed rate to near zero? What? Does anyone in charge know what they are doing or are they using a Ouija board?

They have been steadily dropping the rate for months now. Has this strategy actually been working? Let's see how it affects me, the average Jane.

My savings accounts have all dropped their rates. My money simply cannot make money any more. T-bill rates were negative. My credit card rates are still way up there though (not that I am insane enough to be carrying credit card debt right now). It is still extremely difficult to get a mortgage or car loan at any decent rate. I'm afraid to buy stocks because I don't know how to valuate anything and the market is still a roller coaster.

What about the macro picture? Banks are still failing because they won't lend money to each other. The dollar is in the toilet. The only real way to make money these days seems to be asking the government for a bailout. Now that seems to be a lucrative venture.

So what does the Fed do? Drops the rate even more. Has anyone given Bernanke an Alzheimer's test? Are they throwing darts at a decision board? Channeling with the dead?

And since I mentioned bailouts, let me just say this. You know that I have been a stalwart supporter of President Bush throughout his unpopular presidency. But Lordy Lordy Lordy:

"I've abandoned free-market principles to save the free-market system."
Anyone have a shoe I can hurl?

What the hell is going on here! I'm scared, really scared. And if you think it's going to turn around when President Obama takes office, I caution you to fasten your seat belt. My only comfort is that I keep hoping that it cannot get much worse or much crazier. Or maybe it can. Thinking very strongly of withdrawing all my money, converting it to gold bricks and stuffing it in my mattress.

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