the fed is doing the wrong thing

[bryantm3]

yes, the housing market is declining, yes, unemployment is rising, but that's inconsequential in comparison to the dropping value of the dollar and the rising price of oil. foreign traders buy oil as a security when the value of the dollar drops, so that's a cycle that will repeat itself unless action is taken. and the bush administration and the fed are trying to increase the money supply to aid the ailing housing market- but that's not what we need. the fed needs to raise interest rates. in the short term, the effects will not be great. less people will be buying homes and taking out loans. unemployment will rise. but in the long term, the money supply will decrease and the dollar will become stronger in comparison to other currencies, and the demand for oil will decrease some, at least enough to bring gas under $4 a gallon. thoughts?

[Deckard]

I wish i knew more about economics. What you say about raising interest rates as a long term solution seems to make sense, but then I'm not sure whether the short term pain might spread outwards and eat up any long term gain, so you end up in that trap of spiralling unemployment and inflation.

I dunno, it's probably stupid me even trying to speculate.

The rising price of oil is just a big 'WTF?' at the moment. More than $135/barrel. Last year it was something like $75 wasn't it? Where the hell is that figure going to go?

[cacophony]

i have a friend who works on wall street who emailed me about this yesterday. she said, "we're fucked. as in, here come the end of days fucked."

that's not something i like to hear from someone who spends her days analyzing the financial market.

[cacophony]

also i agree that the fed is wrong. the housing crisis is bad, and it will likely precipitate a credit card default crisis, but we're much better off enduring the short-term hardship than exacerbating our problems by putting so much money and energy into bailing out people who live by failed personal economic policies.

personally i think we're seeing the leading edge of a giant mushroom cloud with the word "credit" scrawled out in debris. it's not just the policy of personal debt that the majority of our citizens live by, it's the federal government itself that has been living off of debt.

we've been playing funny money imaginary math for too long. if i borrow, and you write me an IOU, and i invest that IOU in futures against profits that haven't been earned yet, and someone speculates that those numbers will grow in 2009, WE'LL ALL BE RICH, RIGHT?!?!?!??! LET'S SPEND MORE!!!!

it's unsustainable in the long term.