Today, the Federal Reserve Bank has cut interest rates by 3/4 of a point. Wall Sr=treet is cheering, stocks are flying, and the mood is upbeat.
Good stuff right?… Wrong,,,
Normally when the interest rates are lowered, the banks pass these savings along to the consumer, in the form of lower mortgage rates, and lowered consumer loans, cvredit cards, auto loans etc. Not this time.
The government is giving what amounts to a bailout of the banking system, and in particular, the irresponsible, risk taking managers and financial officers . They are taking these rate reductions and instead of passing the savings to the consumer, they are using these lowered costs to repair their shattered financial statements, leaving the consumer with higher , not lower costs.
In essence, we are spending tax dollars, taken from middle class Americans, and giving them to wealthy, irresponsible, risk taking money managers.
Of course the collateral damage for the public, includes, inflation due to more money in the system.
A weakening dollar which makes imported items more expensive.
A loss of confidence in the system.