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Posted by: Michael Mandel on January 22
The Fed cutting rates this morning by 0.75 percentage points will help some things but not others. The central bank should be able to pump enough liquidity into the financial markets to avoid a general systemic collapse. That’s the main function of the central bank, and they have sufficient resources to do it.
However, the Fed cannot stop the consumer crunch, which is the result of lenders finally realizing that American households have overspent their means. Nor can the Fed stop the coming realization that the underlying U.S. growth rate has been overstated.
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.