Tuesday, January 22, 2008

A Surprise Cut in Fed Rate

Here is more.

Another recession is in the making years down the road if you believe in the Austrian business cycle theory (ABCT). Two wrongs (a low rate environment years ago which resulted in the current mess + current rate cuts to avoid the consequences of the earlier low rates) do not make one right.

But what are the options? If you were the Fed chief, and you believe in ABC theory, what would you do? Doing nothing? Just let the market sweep the slate clean and start all over again?

1 comment:

Kempton said...

In politics, one appears to be stronger if you do something (which turns out to be wrong) than do nothing (which may or may not turn out to be the right thing). The optics of doing something plays a role, I think.