January 22, 2008 by lonbud
A Wing And A Prayer
U.S. Federal Reserve Chairman Ben Bernanke responded to worldwide stock market declines of 5% Monday with a 75 basis-point cut in the Fed Funds rate Tuesday morning. The Fed’s largest single rate cut in 23 years was more notable for its coming just a week before the regularly scheduled meeting of the Fed Board of Governors on January 30.
U.S. markets reacted by trimming massive losses at the opening bell, closing off by only an increasingly common 1% on the day.
Apple Computers, suddenly the darling of the Tech Sector, reported quarterly earnings of $1.74 per share on sales over $9 billion after today’s market close, beating analyst estimates of $1.62. But the stock was down over 11% in overnight trading in the light of company forecasts for earnings well shy of industry expectations in the next quarter.
Andrew Leonard has the most incisive take on the situation at How the World Works, where he essentially calls Mr. Bernanke on pressing the panic button.
It’s hard to view this particular rate cut in another light, actually. The Fed is signaling nearly unprecedented concern for the gyrations of the stock market and clearly rejecting any notion that savings or investment might pull the U.S. (and the world) out of its manifesting financial collapse.
How bad will it be? Only a fool would deign predict.
A number of people might gladly point out much of the world is in better shape structurally, economically, and politically than at almost any time in recorded history. The general lot of the poorest wretches anywhere is far less nasty and brutish and short than ever.
It really is getting better all the time.
But it seems we’re due for the pause that refreshes, doesn’t it?
Russ Winter has some very incisive perspective on the financial meta-verse, which I personally find unusually clear, intuitive, and understandable.
Massive infusions of foreign risk-taking express confidence in the world’s largest and most open economy at the same time they betray its weakness and instability.
My feeling, though, is these are not End Times. We have an opportunity to align our personal and collective interests in ways that reward talent, and excellence, and effort equally with risk-capital. We can declare respect for Life and for Mother Earth our foundational policy and remain on an upward arc for both princes and paupers.
If you are anything like I imagine you to be, you must be thinking I am daft and idealistic, and possibly under the influence of hallucinogens. But I do honestly believe we are at such a juncture in time.
I just wish we had more promising leadership.