The Fed, a secretive, unelected, group in the best of times has two goals to meet via their implementation of fiscal policy: one, keep unemployment low; and two, keep inflation under control. Where there’s ever been a conflict between 1 & 2, they’ve always, always picked inflation control over job growth.
Well, after this morning’s emergency session, and we have confirmation of a new third role for the Fed - they’re also Wall Street’s Bitch.
The Federal Open Market Committee has decided to lower its target for the federal funds rate 75 basis points to 3-1/2 percent.
The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.
Oh, there had been hints before about the Fed pulling out the patent leather and gags any time their daddy fund managers came a’knockin, but today’s out-of-the-blue rate drop ices that cake. Or creams that banana. Or rims that job. Wev.
Now, given my current employment and market positioning, this is all good news for me, but I’m worried about what it means for the country. Because now we have a (quasi, but for all intents and purposes) governmental body making policy based on the whims of a tiny numbers of private corporations and individuals.
Then again, this is the third Gilded Age and a similar (though inverse) relationship has existed before, so maybe I shouldn’t be so surprised.
http://grumpasaurus.com/2008/01/22/a-new-role-for-the-fed/
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