Writing Exercises and Rate Cut Musings
10:33 AM EST
This is the first in a series of writing exercises, the purpose of which is to train to write more quickly and without the writer’s fear of the blank page. The way it works is this: write 300 words in ten minutes every day, without fail. The writing can be on any topic whatsoever, the important thing being to acquire the discipline to write a fixed amount in a set time. The exercise was suggested to me by my colleague at The Motley Fool, Tim Hanson.
On with our thought of the day.
I was disappointed and somewhat surprised that the Fed cut interest rates by 50 bps yesterday. I always thought (in my naiveté) that the Fed’s primary mandate was price stability. This isn’t to say that it can’t pursue other, secondary goals, but it would seem to me that this aggressive move could backfire. Of course, I’m not privy to the kind of information that Mr. Bernanke sees as part of his daily functions, but I didn’t see the need for the cut. Perhaps things in the short-term financing markets are much worse than I have been able to interpret from my following of recent happenings?
Of course, according to Edward Prescott (advisor to the Minneapolis Fed bank and co-recipient of the Nobel Prize in Economics), monetary policy doesn’t cause recessions, so perhaps the converse is true – it doesn’t cause asset bubbles, either. One person who must believe this is Mr. Greenspan, who is on a media tour promoting his book this week. I was amazed to see that this fellow has not a shred of self-doubt about himself and his record as Chairman of the Fed – he would accept no responsibility for the housing bubble. All in all, it has been a bad week for current and former Fed Chairmen, in my view.
*** The above text was written (and spell-checked) in ten minutes. As a result, some of it may not stand up to rational scrutiny. I apologize pre-emptively for any errors, omissions and misrepresentations. ***