Sometimes you got to wonder what people, including high-powered eggheads in Washington, are thinking.
News item: This afternoon The Wall Sreet Journal reported that Federal Reserve Chairman Ben Bernanke had "opened the door to aggressive interest-rate reductions, saying downside risks to the economy 'have become more pronounced.'"
According to the Journal, his remarks "support Wall Street's expectation that officials could lower the fed funds rate by as much as one-half percentage point when they meet at the end of this month."
I for one am glad Mr. Bernanke has at last perhaps fully realized that so-called "downside risks" to the economy are quite real and deserve a hell of a lot of his attention.
But, really, what took him so long to figure that out?
I am no economist-- geez, I managed to get through college without taking an economics course-- but it does not even take a real estate license to know our economy has been heading for trouble ever since the first "creative" home loans (much better, I think, if these financial insstruments were referred to only as "mortgages," the meaning of which can be traced back literally to the phrase "death pledge") were floated four or five years ago before Americans bent on being homeowners or speculators-- despite what their actual finances may have suggested was prudent.
Of course, all those folks eager to get their piece of the American dream (or to "flip it") were aided and abetted if not seduced by the massive forces of the great real estate-mortgage banking-home improvement alliance that seemed to be formed overnight ready to flog along and cash in on this nationwide bacchanalia.
The party was long and hearty and now the hangover is stacking up to be nothing if not world class.
But abstinence alone will not cure this beast. Rather, it is high time the Fed and other economic players in the U.S. government stop talking and swing into action to at least mitigate if not turn around this crisis before it gets any worse.
The Journal also reported this afternoon that its latest survey of economic forecasters "sees 42% odds of a U.S. recession this year along with mounting inflationary pressures, an uncomfortable mix that could influence the focus of the presidential campaign and complicate life for the Federal Reserve."
Home sweet moneypit