Why the Fed's rate cut doesn't doesn't help you...

[stopfascism]

The article is so well written I thought it worth posting. My apologies if someone else has already posted it. Not! It's worth posting again.


Should be titled, "How the Fed's rate cut screws the average Joe,"

http://articles.moneycentral.msn.com/Investing/SuperModels/WhyTheFedCutsWontHelpYou.aspx

"If that sounds unfair, welcome to the latest episode of a brutal new American business ethic, in which the government bails out bad bets by risk-taking banking executives in New York with money that it borrows from middle-class families and foreign investors. The effort is gilded with fancy financial language and cloaked in the guise of a rescue that helps all citizens, but the reality is that Washington is essentially robbing the poor to help the rich."

banks have made three important changes in their usual practice:

* They have not been passing all of their interest-rate savings to customers.

* They have restricted lending only to most creditworthy, documented applicants.

* They have cut the total amount they're willing to lend.

"They're pulling a big 180, which is as confusing as it is disheartening. Rather than providing funds to prospective home buyers and business people with legitimate needs for moving into larger homes or expanding factory lines, records show the banks are hoarding the low-cost money they're borrowing from the Fed and investing it in Treasury bonds paying higher interest yields. They're then pocketing the windfall profits to repair their own ravaged balance sheets."

"As if that's not bad enough, the Fed's swiftly conceived, unprecedented course of action harms the public in three other ways:

* It boosts inflation by lifting the total number of dollars in circulation.

* It undercuts the attractiveness of the U.S. dollar, which leads to higher food, energy and gold prices.

* It cuts the yields of dividend-paying investments such as government bonds upon which retirees depend for steady income."


This will be one of the longest and hardest recession in this country's history.