Ben Bernanke Panics : 50 Basis Point Cut

The long awaited decision from Ben Bernanke and the Federal Reserve FOMC meeting was released at 2:15 PM this afternoon. The Fed in it’s infinite wisdom and with more than a touch of panic cut the Fed Funds Rate by 50 basis points as well as a 50 point cut in the Discount Rate.

Ben’s Wall Street friends certainly liked the Fed’s decision as the Dow rallied more than 100 points in a matter of minutes and is currently up about 246 on the day at about 13,650.

However, this was probably the last push that the US Dollar needs to go right over the edge. A Dollar collapse will not in the long run be good for anyone in the US , including the Wall Street gang, but from today’s action seems to be underway as I write.

Just as inflation is making a huge comeback Ben Bernanke and company signals in a big way that it is of little concern. In order to try and prop up a faltering economy the Fed has signaled that it will pump out increasing amounts of money at lower rates. This may well help to prop up the housing market for a short time but don’t bet on it.

The round of ARM resets coming up in October and through the middle of 2008 will in my view swamp the Federal Reserve action taken today. A few million more Americans are going to be facing much higher monthly housing mortgage payments just as inflation kicks in. It will be a grim situation.

In addition, the collapse of the Dollar is going to become big news that will override a lot of other factors as this year progresses. If you are still invested in stocks and real estate you had best bucket up your safety belt fast. The ride ahead is likely  to be an extremely rough one. 

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