Wednesday, 19 September 2007

Bernanke put invoked

Ben Bernanke rode to the rescue in his shiny federal reserve helicopter lobbing cheap money at idiots who don't deserve it. If there was any doubt about Bernanke's priorities there isn't now. Save Wall street not Main street.

The stock market rallied more than 2% while the ass fell out of the dollar. The dollar index, which tracks the greenback against a basket of six major currencies broke below a 15-year low and dropped to 79.170, down from 79.645 before the announcement.

Years of academic study and tutelage under easy Al has led Bernanke to decide that the solution to the problem of an excess of cheap money is more of the same.

Again the Fed's decision highlights just how far behind the curve they are. From less than 2 months ago where the chief concern was inflation to a 50 bp cut in the fed funds rate to prop up an ailing economy.

The short term rally in the stock market was to be expected. However that will be short-lived. Housing continues to tank, employment is in doubt and corporate earnings are slowing. None of this has changed. If the consumer wasn't stretched enough already now they will have to contend with higher prices as the dollar sinks.