Every time the Fed cuts the discount rate I choruses of cheers. I can almost guarantee you that within an hour of
the announcement that there will be a post here on AR supporting the decision in the hope that "this cut" will be the one that brings the credit (and therefore the housing ) markets back.
Yet none of the cuts so far have been able to accomplish this. Why do you think that this is?
If you watch the financial news networks you've probably heard them referring to "Pushing On A String". That is that the fed is pushing, but that the markets aren't responding. Well, what exactly does this mean and why aren't the markets responding?
Well, the reason that the credit and housing markets aren't responding is because the fed cutting interest rates isn't really intended to fix the markets, at least not directly. These cuts are intended to shore up the banking industry. It insulate them from the bad decisions that they have made. In short, to keep them from failing.
What's another word for this? How about "Bailout"?
Yep, a good old fashion bailout. One that is costing each and every one of us thousands of dollars.
But Wait, Bob...isn't that what the fed is supposed to do?
Well, actually that is true. Keeping the US banking system, and therefore the economy, stable is one of the primary reasons that there is a Federal Reserve Bank. People can argue if there should be a fed and if so, should it be structured the way that it is, but the fact remains that there is one and keeping the banking system from collapsing is indeed one of their purposes.
The problem comes in when the fed takes steps to benefit Wall Street and the Big Banks that end up costing each of us money. Shouldn't we have a say in these matters? Did you even know that we don't?
Most people don't realize this. The Federal Reserve Bank is a privately held corporation that is only loosely regulated by the federal government. For the most part they control our currency and as you probably know, the golden rule is that he who controls the gold (in this case currency) makes the rules! If you don't believe me, let me ask you this...."Who did you vote for in the race for Fed Chairman?" Can't remember, can you? That's because you didn't vote for him!
Anyway, before I turn this into a rant, I don't want to lose my original point. If we're not going to bail out the home owners who are in danger of losing their homes, how can we justify bailing out Wall Street? Bad decisions were made all around, why is it that the big guys get bailed out, while the little guys get left hanging?
R.B. "Bob" Mitchell
ValueList Real Estate Services, Inc.
Bob Mitchell is president of ValueList Real Estate Services, St. Louis' largest discount/full-service real estate and mortgage company. If you would like to find out more about Bob, ValueList or our flat-fee listing program, please feel free to visit our web site at valuelistre.com
Comments(4)