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.
scott gelfand - January 23, 2008 @ 8:23 am
Promising leadership comes in so many forms, at so many times, often right in front of our noses without realizing. We are just looking at the wrong positions. The laughter of our children, the songs of our singers, the warmth of our Sun all promise us that Life is beautiful and re-fulfilling.
Seeking leadership from politicians seems like we are asking our plumber to fix our car. They are swimming in disfunctional and immature waters – mired in their own survival and ego.
Wisdom knows no position, no barriers, no titles. If only we can train ourselves to Listen.
I agree with your daftiness and idealism. Let’s raise the conversation and see beyond the fear of this moment to the greater good. And the greater good surely lies in its simplicity that happens every day that doesn’t make the headlines.
KC - January 23, 2008 @ 8:44 am
And I hope your wish comes true!
I love your optimism because I’m all about looking at the positive even in times of despair.
It’s not always easy!
Mike Fleming - January 23, 2008 @ 9:19 am
Lonnie,
Good post. I’ll condense my 4 year BA in Social Science down to one sentence, “That which functions thrives and survives, that which doesn’t function, withers and dies; as it should.” Thank you Samuel Johnson.
The housing market upon, which so much of our consumer based economy has staked its wealth quotient, has been broken for a long time. Its just that no one wanted to see it as rising prices seemed to be raising all boats. Now that the tide is going out, as these cycles tend to do, everyone is freaking. Including the Fed.
No politician is going to call out the craziness that this housing market has wrought as no one wants to hear it. No homeowner is going to call for a sane pricing structure as they are sure to loose paper value in their largest asset.
Security is internal, not external. The external is only Maya, illusion.
“Open” Mike
Tam O’Tellico - January 23, 2008 @ 9:58 pm
I am always amazed that the very same people who incessantly tout the Free Market, and don’t seem to care in the least when ordinary folks get strangled by the “invisible hand”, suddenly and brazenly do an about face and become ardent interventionists when it looks like their ox — or in this case bull — is about to be gored. The real reason for the “economic stimulus” is two-fold (1) to prop up the market and preserve the holdings of investors, and (2) to hold off the recession for another year so that the next President can be blamed for it.
I don’t believe it’s going to work this time, however, because we’ve gone much too far down the rabbit hole. The same rabbits who went scurrying into real estate speculation when the dot-com bubble burst are now buying precious metals.
What any of this wealth thru speculation has to do with production of goods and services escapes me, but then I’m not a Randian acolyte. It all strikes me as just a more sophisticated form of the lottery. But when the govt kites checks to the tune of trillions, who can blame investors and consumers for following the same “investment plan”?