[pokerjoe]

As the resident MW psycho-pseudo-econ dude, I feel compelled:

The Fed, fearing a stock market drop, takes 3/4 of a point off its funds rate last week, and the market does seem buoyed. Great. And our beloved leaders also promise us a stimulus package, in which most of us will get a bit of a paycheck, probably in the late spring, certainly before election day. Also, great.

Do they, and we, not know that ZERO is coming? We can't drop rates below zero. Yet, we're headed that way. To zero. And then what? Then we have no ammunition left, with monsters still coming. It's like we're a drug addict, trying to kick, but as soon as things get tough, we (Wall Street, really) start begging for just one more dose, please, just, get me through this tough stretch and then I'll quit, I will, I promise.

I won't even delve into the immorality of a government that cares about Wall Street returns, or feeds into a culture of gamblers who feel entitled to collect when they win but get bailed out when they lose (as with the various foreclosure solutions being talked of). Markets are supposed to go up and down. They're supposed to. Up and down. Up and down. And if they don't, they don't work. But, let's let that go.

My point is that ZERO IS COMING. And that will break us. We can't just keep lowering the fed rate. We can't. It just isn't possible because ZERO IS COMING. Yet we keep driving toward that cliff, pretending it isn't coming. Lowering the fed rate is keeping our economy alive; zero is coming. Hmmm.

In the meantime, gold looks better than ever, doesn't it? Everytime the Fed drops the rate, the dollar devalues, and because gold trades on a world market, it's price in dollars rises. But what's more, as the dollar devalues, the idea of keeping funds out of currency altogether gains momentum. And also, if the biggest knock on gold is that it doesn't collect interest, how much of a knock is that if nothing collects much interest? The rise of the dollar as the world's default reserve currency broke gold. The collapse of the dollar as the world's default reserve will resurrect it. (btw, this wisdom enters my head only after selling 20 ounces when gold crossed $750, and seeing it hit $915 today).

But there is a greater economic stupidity than dropping the Fed rate: the stimulus package. And I'll let all defenders of the action figure this out: why give us all $600, or $800, or whatever it'll end up being? Why not give us $60,000 each? Why not $6 million each? Why not? Really, take the time and articulate to yourselve why $6 million each would be ridiculous, and then you'll understand why $600 is ridiculous, only on a lesser scale, because the difference only is a matter of scale.

The US got into this mess by spending money we don't have (budget deficit, trade deficit), and by discouraging savings (taxing income much more than spending, and dropping the Fed rate so that savers earn less and borrowers pay less). So our solutions, so far, consist of again dropping the Fed rate (to further punish savers and save borrowers), and of worsening the budget deficit by dishing out more money we don't have, via the stimulus package.

Brilliant.

The only good news is that the rest of the world will suffer right along with us because, in their greed to sell us shit we don't need for money we don't have, they took their profits in devaluating dollars and collapsing mortage-based securities. Lucky them.