Jim D. wrote: On 9/4/07, Doug Henwood <[EMAIL PROTECTED]> wrote:
The halting moves themselves aren't directed at the working class, but the haltingness takes the w.c. in to consideration. That is, without the financial crisis, the Fed would be hanging tough, and not even the melodramas of recent weeks (which seem to be subsiding, at least for now) are enough to make them shake that toughness.
In other words, the Fed has conflicting goals. It wants to simultaneously keep unemployment from falling "too far" and to keep the financial system stable. The first involves raising interest rates when U gets near the estimated "natural" rate or at the smallest hint of faster inflation. The second involves lower rates. ============================ Yes, and it may also be that the Fed hasn't cut the fed funds rate yet and probably won't until the FOMC meeting on the 18th more from luck and fear than toughness. It has been lucky the market has brought Treasury yields down for it in a flight to quality, so that it's "only" been short-term asset-backed commercial paper which has been affected. And it's been fearful that any Fed moves between meetings would trigger more panic in the markets than already exists. Barring any surprises from a big bank which forces the Fed's hand earlier, it seems that the rate cuts will probably be more in anticipation of a coming wave of home foreclosures and economic slowing over the next year than a belated response to the current shakeout in the financial markets.
