Bernanke says fed prepared to further cut rates

[boozehound]

This guy is in way over his head, IMO. He inspires no confidence whatsoever. What is all this rate cutting accomplishing? (outside of helping to devalue the dollar). Lets recap: we are in a financial crisis becasue people spent way too much borrowed money, so lets drop rates to encourage people to spend more borrowed money to stimulate the economy. Isn't that what got us into this mess in the first place? Sometimes economies have to go into recession. It's a fact. The more he plays with the discount rate and tries to take heroic measures to stave off depression, the worse it's going to be. Rant over.

[Muskie in dayton]

I agree a rate cut may not be the solution - the last thing this country needs is to be enticed into more consumer debt. But at least it will help keep adjustable mortgages lower to avert a deepening of the housing crisis. Plus hopefully those with adjustable rates will be smart enough to lock in to a fixed rate so we don't end up in the same place in a few years.

But the real answer is to cut foreign investment (i.e., Iraq). Sending all those resources overseas with nothing in return but an international black eye has devastated this country. If we put a portion of that savings into lowering taxes, and divert the other portion into improving our civil infrastructure (domestic spending), then let the multiplier effect kick in and revive the economy!

[Lasser83]

But the real answer is to cut foreign investment (i.e., Iraq). Sending all those resources overseas with nothing in return but an international black eye has devastated this country. If we put a portion of that savings into lowering taxes, and divert the other portion into improving our civil infrastructure (domestic spending), then let the multiplier effect kick in and revive the economy!


The question on if the Iraq war is a drain on the economy centers on its distortionary effects. Most of the spending on the war enriches Americans (from the soldiers to American companies suppling the war).

But could that money spent on the war be crowding out a more fruitful industry?


Most economist would say NO. The percentage of GDP of the Iraq war is tiny. The crowding out effect, or distortionary effects are small if not completely absent. The war will not cause interest rates to increase and impair private enterprises.


There's a lot to dislike about the Iraq war, but it's not a drain on the economy.