Cutting rates and flooding the market with dollars is not going to
solve a fundamental problem. That is, there are no bubbles left to
blow in the economy.
In the 90s, I have counted 5 to 6 major bubbles. Some of these
bubbles had an additional spinoffs - a productivity boost. E.g. like
the computerization of businesses. From low oil prices, to the
collapse of the USSR, to the emergence of the Internet, to victory in
the Gulf war that Arabs were made to pay, to the stagnation of the
Japanese economy. This was the decade to be in.
Post 2000, there has been just one large bubble - the housing market.
Conversely, there were negative bubbles like the 911 bubble and the
Iraq war bubble but the housing market kept the market from falling
even if the dollar was declining in value.
Now in 2008 there are no foreseeable bubbles. Maybe a small ex****t
bubble as the dollar declines. Perhaps a distant biotech bubble when
they create replacable organs or other genetic discoveries. Perhaps a
bubble in MEMs. But nothing in the immediate horizon as far as I can
see.
So just like clockwork, the market will initially rise after the rate
cut... quickly realise that there's nothing coming but debt repayment
and dollar devaluations... and sink into the abyss.
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