If you were planning a trip to Canada or Europe, your trip just got a little more expensive. But you'd probably get better value for your money by staying in the US and vacationing here. On a purchasing power parity basis, both the Canadian $ and the Euro are overvalued, and have been for months if not years. From postage to gasoline, just about everything costs more in Canada, and probably a lot more in Europe. Even though the C$ and US$ are almost at parity with each other, a first class domestic stamp will cost you C$0.52 (plus 6% Federal tax), but only US$0.41 in the US. A gallon of gasoline costs less than US$3.00 in most of the US. The equivalent amount in Calgary, Alberta would cost you about US$3.90. The comparisons are even worse if you use France or Germany.

The Fed funds rate cut will make it easier for financial institutions in the US to deal with the sub prime mortgage mess. It will also mean lower prices (when translated into C$) for Canadians who live close to the US border and who do much of their shopping in US border towns. If you keep most of your savings in 6 month CDs, be prepared for a lower interest rate next time you roll them over. But it will be a long time, if ever, before US consumer prices reach Canadian or European levels. Personally, I'm glad the US stock market went up today. As a retiree who gets much of his income from stock dividends, I want the banks to do well and to keep raising their dividends every year.

Every time a random events hits and affects the markets (and you'll notice, the connection between 'events' and financial markets is a very complex thing to ascertain, let alone understand and modelize) there's always some guy who comes out of the woods announcing that doom is upon us and that we should buy gold. 200 years of financial data say: when doom is upon you, don't do anything. Or even better, if you're adventurous, when doom is upon you, buy stocks.

-- concerntroll

i've traded,and love to be contrarian.as a capitalist it was fun to buy junk bonds during the panic when enron and worldcon went bankrupt.hard assets like gold are not gloom and doom.it's just a trade.look at a chart where you can see the dow/gold ratio over the last 100 years.there are times to own hard assets and time to own soft ones,and if the only trades you ever did were from gold to dow and back over the peaks and vallies the last 100 years,there is no better performance.

but gold is different-you should NEVER buy a hard asset or commodity without an eye for the exit before you start...

The Fed's half rate point cut was madness, pure and simple madness. The reckless and wild act of a panicked man, not a sober decision. All it does is provide more "crack" (cheap money) for the Wall Street crackheads - the endless legion of speculating pimps who never met a dupe they didn't like. And some fools and whakcnuts are even talking of a succession of cuts because "like potato chips, you can't have just one"

Oh yeah? How about this for size? Foreign investors will now pour extra pressure on the greenback driving it down even lower vs. the euro. I expect it will be $1.55:1 within a week. Those holding U.S. debt will NOT be pleased to see their investments shrink, and will be less likely to support more new debt.

As for "recession" --- bada bing boondoggles. The REAL risk is stagflation a la the 70s. Followed by soaring, rip roaring inflation in the 18-20% realm not seen since the Carter era.

Lest I forget, oil will now be much more expensive as well since the dollars to buy them will all be much cheaper. (Not to mention most petro money is now based on the euro)

This was a bad move, by a panic-stricken bunch who ought to have weighed their move much more carefully, as opposed to tossing another morsel to the Wall Street scheisters and predators- who will now sit down to crank out ever new ways to screw the most vulnerable.

Fuck the Fed and the horsie they rode in on.

As I recall from reading history, prior to World War II the government of Germany printed quite a bit of money to deal with its fiscal problems. See, e.g., http://www.history.ucsb.edu/faculty/marcuse/classes/33d/projects/1920s/Econ20s.htm. That the Federal Reserve lowered rates so quickly under this type of pressure is troubling. What if this rate cut is not enough? How far will it go?

Recall the economy of Japan over the past fifteen or twenty years, please...

Japanese interest rates went down to around zero, and real estate prices plummeted, and everthing stayed quiet and scary for over a decade.... Sound vaguely familiar?

During that period, American guys in suits guffawed, and gave patronizing smiles, but here we are, America!

We are just at the start. Our Geniuses have managed our economy down to Mitsubishi Zero. Only consolation: Those of us who refinanced in Japan ten years ago or so, and borrowed money in Japan at 0%, and then reloaned that money in the USA... We are rich now!

Did you do it? Neither did I. Next time around, if we live that long.

The Federal Reserve is not your friend.

I guess Nader was right. Let the bailouts continue!

Like Nader claims his pappy used to asked: "Why will capitalism always survive?"

His answer: "Because socialism will always be used to save it."

It appears as if the Central Bankers may finally win, say goodbye to the USA and hello to World Government. NAU here we come!

I bet Jackson is rolling over in his grave.

if his goal is to sustain/resuscitate a credit bubble. This is to say if he knows both of the irrefutable existence of a credit bubble, of its massive scope, its acute vulnerability, how it came to be, who has profited, who enabled it, who knew what when, and now at this late stage, the consequences of its endgame. Of course we don't get that. Instead we get, 'prevent financial market turbulence from impacting the broader economy' blah blah baloney. Take a few euphemisms, season with some meaningless modifiers and articulate the whole thing in a passive voice such that, read backwards, the mind-numbing intonation recalls the pitter patter of urine excreted by moneyed corporate interests and financiers on the heads of plebes from up on high. Presto: you have Fed speak.

Make no mistake about it, there is no series of bubbles, just one big bubble that's been steadily inflating for 25 years (with a few interim hiccups that have dented sentiment in certain asset classes along the way). Any which way you slice it, the possibility of sustaining the amount of credit growth required have been exhausted- see the flow of funds reports for trend debt growth in the last six years. Unfortunately for Big Ben, he will get a chance to see his revisionist Depression theory falsified on his very watch, resulting from his very actions, before his very eyes. His justice cometh, and that right soon.