Fed Slashes Rates, Threatens Dollar

The Federal Reserve, the private group of banks that can charge the taxpayers interest on money that they create out of thin air and also control the value of the dollars in your pocket, has slashed the prime interest rate three-quarters of one percent. This is triple the size of their typical adjustment and indicates the panic that the money masters are feeling. Stock markets around the world are contracting sharply. The world has been unwilling to accept a contraction in the business cycle, but all they know how to do about it is what they have always done- throw piles of easy money at the problem.

The Fed is now in a trap. The normal business cycle has been short-circuited for so long that if they let it play out now the effects on the economy could be devastating. But the economy does not just rely on people have access to currency, that currency must also be a reliable store of value. The dollar was already in trouble, and lowering the number of future dollars paid for a loan of dollars now will only make the dollar weaker. Oil has gone from $22 a barrel at the start of the Bush administration to $100 now. Gold, silver, and even copper have greatly increased in value compared to the faltering dollar. Even food prices are skyrocketing. This is all a direct result of the government and the Fed's flawed policies.

President Bush thinks the answer is a "stimulus package" where the government joins the Fed in dropping bales of money out of helicopters to make people more secure about their financial situation so they will go on spending. But shoving new dollars unto the market will not increase the number of cars, cell phones, or apples on the market. It will only bid up the price for the same supply of those things- in other words, cause inflation.

The fact is that the government, and the Fed, have to much control over our economy. Too many dollars are spent as a result of government programs and compliance with government programs. Those dollars will be spent less efficiently than they would be as a result of private decisions by people taking advantage of opportunities as the occur. Excessive government intervention in the economy is what is dragging us down, and more government won't fix it, is will only make things worse. The Fed can act as a co-conspirator with the government by spreading easy money around, but as they do it erodes the power of money. Before they were crafty and eroded the purchasing power of the dollar at a slow enough rate that most people did not notice it from day to day. Now they are in a situation where they have to erode it even though it is collapsing at a rate that the general public can no longer ignore.