The Federal Reserve Cuts Rates By A Surprising Half Point. Be Afraid.

The markets rallied on news that the Fed cut its key benchmark rate by a surprising 1/2 point, not the expected 1/4, reflecting the convention wisdom that this will solve the current financial and housing crises. I wish this were true but an innovation in finance—structured finance—makes the fed move unlikely to curb the decline anytime soon. Fed Chairman Bernanke was bold in cutting rates so much but his move underlines the seriousness of the situation.

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