Tuesday, September 18, 2007


You, your kids and the Federal Reserve

Later today, Ben Bernanke, Chairman of the Federal Reserve, will announce some kind of cut in the Federal Funds rate, the base rate upon which the markets take their cue. Currently, it's at 5.25% and it's widely expected that the Fed will cut to 5% or even 4.75%.

What this means for the average American is actually not much on the surface, though what it means down the road and long into the future is important. If the Fed manages credit and risk properly, America generally has a well-functioning, robust economy. Bad management, such as what was committed by the previous Fed Chairman, Alan Greenspan, can cost dearly, as we're seeing today.

Greenspan, though he was revered in financial circles as a genius, was actually a credit pumper, ever ready to lower rates at the first sign of a bump in the economy. He's the major reason we have a credit crunch at major lending institutions today and why the housing market may not recover for years to come. Greenspan was far too loose with monetary policy and it's going to cost all of us and our kids, dearly.

Here's hoping that Ben Bernanke is a bit more circumspect and rational in his decision-making regarding not only interest rates, but te future of our country. Today will be a real test for him.

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