Fed can't stop recession (Some thing a rate cut will make things worse)

NEW YORK (CNNMoney.com) -- Problems in housing, the financial markets and the first job decline in four years have made a Federal Reserve rate cut next week all but certain. But it has also raised talk about a recession -- and whether the Fed is able to prevent one.

While most economists still don't believe the nation will fall into a recession, there is general agreement that the economy now faces a greater risk than there was only a month or two ago.

It's not clear how much Federal Reserve Chairman Ben Bernanke will be able to do if the U.S. economy does start to slide towards recession.

Problems in the financial credit markets are only part of the risk faced by the U.S. economy.

But many economists also say that the Fed can do little at this point to address many of the factors threatening continued economic growth. Some economists even argue that rate cuts could make matters worse.

The mortgage market would seem to be where the Fed could have the most effect. Most directly, a rate cut will reduce the rates for adjustable rate mortgages, one of the types of loans that has caused the problems for lenders and subprime borrowers, those with less-than-perfect credit.

An estimated 2 million homeowners face sharply higher mortgage payments when their current loans reset over the next year. So a Fed rate cut could possibly stave off a wave of foreclosures.

That's key since more foreclosures could have the potential to hurt consumer spending as a whole, said David Wyss, chief economist for Standard & Poor's.

A rate cut will not stop the arms resetting.

Nobody said it would.

Or the drop in home values.

Nobody said it would.

The only way to effectively cut rates to stop the majority of the subprime from loosing their shirts is to cut down to near zero.

Who said rates should or could be cut enough to stop people who can't afford their homes from losing them? Or to stop the buyers of the bad paper from losing billions?

Better to let the 1% or 2% of the homes with these bad loans take their lumps. And of course no banker bailouts.

Absolutely.

“Thank goodness, 90% of the market, including the Fed I believe, agree with me.”

You sound like your getting your market education from CNBC or the MSM. You believe just what they and our government want you to believe, everythings fine. If 90% agree with your above statement if you knew even some basic things about market psychology that statement would scare you as the herd is almost always wrong. If they stay to the end they are always wrong.

The Fed has NEVER engineered a soft landing.

Our government is lying to us everyday with their CPI’s and PPI’s and all those other acronyms they hand out. Our gov is saying our inflation rate is around 3% when it really is about 10 to 15%. Anecdotal? If you yourself go food shopping you know your food costs have gone up way more than 3%. Ever stop for gas? Not cheap anymore is it? Those things are not counted in the inflation rate.

“Inflation is not a major concern”

This last Tues the Fed sure didn’t agree with you. They said they are watching inflation. When gold isn’t rare, when there’s plenty to spare, how much is gold worth? Not much. Our gov money printing presses are burning white hot now pumping money into our economy to keep it going. The dollar is headed down as you say but you don’t mention that imports, which this country is famous for, go up. That means everybody will pay for the outrageous amounts of money the Treasury is dumping into the world. The world now is starting to sell off our governments financial instruments so the dollar will be headed lower faster. Even higher priced imports then. It will keep spiraling down from here.

“There is no reason we can’t use wise fiscal policy to prevent this.”

How many people do you want to hurt real bad and for how long? Wise fiscal policies at this point will hurt just about everybody for a time. Americans have had it good since ‘80 and their patience would not outlast the wise fiscal policies that would have to take affect til this mess is cleaned up (if it can be). Personally I think Americans would revolt.

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