Addendum on Fed - The American Spectator | USA News and Politics
Addendum on Fed

I also am looking at signs that say the short-term inflation picture, at least, is a bit brighter. Core inflation already is moving downward, and oil prices have retreated in the past week, and gasoline prices are expected to drop in the fall with the summer vacation season ending, all of which argues that a tiny bit of interest rate relief could be absorbed without triggering new price-inflation problems. Remember, too, that interest rate cuts can boost business investment even more than they boost consumer spending, meaning that more goods will be produced, and the supply side can thus absorb what consumer spending there is. If you want to reassure 14 million homeowners that they have just a bit of relief and thus some hope, and if you want to avoid a panic that feeds on itself as mortgage companies declare bankruptcy, a tiny rate cut might just be the right solution — IF it is understood, because of a clear Fed statement, that it does not signal a long-term lack of concern with inflation.

What it comes down to is this: A whole bunch of people bought their first homes about four years ago when rates were absurdly low, and made the mistake of getting an adjustable rate mortgage. (This does NOT apply to me, by the way, thank goodness.) They are now realizing they can’t make their payments, and they need to sell. But buyers are a bit wary. It is amazing what even a quarter-point can mean to a new home buyer. It could make the difference between buying or not. If they buy, they get an asset, and the over-extended seller gets out of a bad deal rather than being forcelosed upon or declaring personal bankruptcy, or whatever. Which is why yesterday would have been a good time, as Cramer said in his rant, for a little help from the Fed.

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