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March 17th, 2008 8:54 AM by David W. Welch
I am not an economist, nor am I a banker, but I studied both in college, grad school and post grad. I know enough to at least say I have an educated opinion. I have also spoken with friends of mine that are in "the market", and banking. The conclusion we all seem to have is that these urgent actions actually are creating a negative response in the markets. It is my opinion that the rate cutting is contributing to both the tumbling dollar and the skyrocketing oil prices.
Without getting into a deep explanation, the reactions of the Fed are creating tremendous uncertainty. At home and abroad, people are concerned that the US is heading into a deep recession and banking crisis. One lesson I remember from my banking class had to do with the role of the Fed. The Fed has several tools in its toolbox for balancing the economy. The single most effective is rhetoric. What they say and how they say it has far reaching results.
The recent actions of the Fed have broadcast loud and clear their concerns about the US economy. I know I sell real estate, and my blog is titled www.RealEstateOptimist.com, but a more positive message like "Buy a Home - It's OK!" would be far more beneficial to the economy right now. Given household creation numbers I have seen for Orlando, we are selling only half the number of homes we should be selling. That means there are qualified people still waiting to buy. They are waiting because of their concerns about housing values and their jobs. If all of them would just start buying, both concerns would ease considerably.