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Take Two Fed Cuts And Call Me In The Morning

By
Mortgage and Lending with Bank of England (NMLS#418481) NMLS# 1046286

If you watch the talking heads on the various business/news shows on a regular basis, you might have noticed that they change their tune to fit whatever the realities of the day are.  A couple of years ago when the economy wasFox News slowing they would say that housing was keeping the economy afloat.

When the sub-prime flu hit and the housing market got sick, consumer spending was what was keeping the economy afloat.  Now it's over seas investors who are going to keep our economy afloat.  What or who is it going to be next?  The Martians coming to our rescue?

The fact is that our economy is in dire straits.  And it should come as no surprise.  Several years ago I wrote a commentary called, "Anybody Can Throw A Party On A Charge Card" where I compared the way that the Bush administration was spending money to a kegger that we threw in college when some bank was stupid enough to give my roommate a charge card.

Needed more beer?  Send Mark down to the liquor store with his charge.  People are hungry?  "Hey Mark, Call Pizza Hut!"   

Wild PartyIt was a hell of a party!  Especially if you were a Halliburton or other such company.  But the sad fact is that while you can keep the party going for quite some time using your charge cards, eventually the bills come due.  Fancy footwork with your accounting may be able to stretch things out for a bit, but eventually it's time to turn the music down, the lights off and go to bed. 

How many of you guys remember those mornings after?

You felt like crap, didn't you?  Well, get ready folks!  We've got a world class hangover on it's way!  As a matter of fact, we're already starting to feel it. 

The dollar is in the tank.  To the point where the, "Take Two Fed Interest Rate Cuts and Call Me In The Morning" treatment isn't going to work.  It's not going to work because further interest rate cuts are going to put more downward pressure on the value of the dollar.

The dollar has lost enough value already to put upward pressures on inflation.  Further cuts could send inflation spiraling out of control.  We're to the point where the rest of the world is starting to lose faith in the dollar and I wouldn't be surprised to see indications of this such as oil being priced in Euros instead of dollars.  Don't want to think about how this would affect our economy?  Don't worry, economists don't want to even think about it either!  Suffice it to say that it wouldn't be a good thing!

So Bob, Is It Too Late To Save The Empire?

First of all, I have faith in our economy and the fact that Americans are resilient.  I also have faith in the fact that there are self-correcting mechanisms that will kick to cushion our fall.  I also think that there are steps that we, as a people can take to get our economic situation under control, but that is the subject of my next post.  So, as soon as I've written it, I'll link to it and you will be able to see what Professor Bob thinks that we should do!

Here's Part II, "Is It Too Late To Save The Empire?"

 

R.B. "Bob" Mitchell

ValueList Real Estate Services, Inc. 

 

Bob Mitchell is the president of ValueList Real Estate Services, Inc., St. Louis' largest discount/full-service real estate and mortgage company.  To find out more about Bob, ValueList or our flat-fee listing program please feel free to visit our web page, valuelistre.com 


 

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