On recession, Fed rate cut, market turmoil et al...

After some months of increasing common knowledge that all is not well with the US economy, the Fed finally stepped up to the plate, and made a forceful move to cut rate by 75 basis points. Such was the attempt to try to soothe the markets in US, and around the world that took the dive after news that the Fed rate cut might not be sufficient.

With one single body (the Fed), having a limited arsenal of tools that it can use to steer the economy, and given the sheer size of the US economy, it's not surprising that Ben Bernanke, the Fed Chairman, is never going to please everyone in the game. There are the usual rely-on-thyself bunch who reckons reducing rate is going to reward those who benefited from and ultimately burnt by the falling property market. Well, it very well might.

And then there are the advocacy groups who would never think the government does enough to help the poor (who are predominantly non-white minority) since they're hurt by the rate reset of adjustable subprime loans. For those in this group who were targets of predatory lending practice by mortgage lenders and banks, these are valid arguments, although it's hard to ignore the fact that these predominantly minority would get into things that beg fools errand. It's equally hard to accept arguments that "They (ie. lenders) didn't tell me!"

On the other side of the scale stands Wall Street, which judges everything from a capitalist lens. Of course the rate should be kept as low as possible "to stimulate the economy." To me, they're more interested in keeping the easy credit going, so that the CDO, SIV, and all other parties from alphabets can continue. To them, rate cut is never enough, and it's always too late.

And then there is the White House who pisses in the wind and see which way the wind blows. To Bush, the economy can go from great and fundamentals-very-strong, to we-need-to-pass-$150-billion-stimulus-package-fast to help save the economy, all within the span of less than two months. The idiocy is quite astounding.

Oh, and the economists. How can we have economy without economists! They would tell us, all signs are good, we're going strong (Bush's speechwriter must have copied the line from some economy 101 textbook), companies outlook great, bla bla blah.

All these...while we the real humans, who live in the real world, who live the real life, would know what's going on.

We don't care if economists or White House or corporate chieftains gloss over the effects of globalization. what we do know and care is that, while jobs market recover (thus holding unemployment down, which is all economists see), the jobs would pay us half of what we used to get ten years ago when Bill Clinton left office. The raise from my job doesn't keep pace with inflation, albeit the low inflation (what, less than 2.5-3% p.a.). In other words, I'm NOT doing great, Mr Bush and Mr Economist, even though technically I am, since I still have a job, right? Don't tell me that the everyday-low-price from Wal-Mart is going to help me, since my spending power is reduced, given the same dollar amount from salary. It's really very insulting to our intelligence for them to tell me otherwise. Does Bush believe that, by repeating the same lie ten times, it's going to become truth? Is that his way of "positive thinking"?!?

The inflation has been low, but it's not the making of the Fed or smart policy of the White House. It's an incidental byproduct of utilizing the overcapacity in China for exports to US, that has been keeping our inflation in check. Naturally, there will come a time when space capacity is depleted (salary going up fast and strong in India and China), while the basic raw resources remain and are getting more scarce. So now, it catches up with us. Oil price hits $100 barrel, so do prices of all raw materials of precious metals. Couple that with water shortage, and the picture looks so much more gloomier to me that I don't feel like reading business and economic news at times. These are some of the major external factors.

Locally in US, the homegrown doom of rising costs in health care, education, and more, make me wonder why we should be happy (as Bush and economists would have told us), when we are so screwed.

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But, I'm hopeful, not for Bush to do anything intelligently, but to feel less guilty to detach and free myself from a job that I use to like, to starting a business of my own and try something new. It might be big and it could be small. But at least the opportunity costs (as the economists would love to call it) are so much lower than that it doesn't make sense for me NOT to pursue it.
Perhaps that's the silver lining in all the dooms and glooms. Perhaps that's the way God is telling me, I should see another life. Yes, I'm listening...