Dropping interest rates to halt a sag in the economy only makes sense when people have real asset value to borrow against- like their homes. It also only makes sense when there are real opportunities for consumer credit for lenders to exploit: IE, people shopping for good loans with good credit on durable goods (cars, etc).

In this context, we see asset value declining and a spike in unsecured consumer debt- IE, credit cards. People have cashed out their equity and may even be 'upside down' on their mortgages, and have turned to credit cards to stay afloat. While lowering interest rates will help the lender companies, but not the drowning-in-debt consumer.

What lowering interest rates will do is drive the dollar down. That will produce tremendous pain for China (who pegs their currency to the dollar). When the Dollar was high and world-standard currency (one could say, as good as gold), pegging their currency made a lot of sense. But as the dollar continues to collapse (and don't fool yourself, this is a collapse!) this strategy is going to hurt China.

Worst case scenario? China does one or both of the following: Floats their currency and/or starts dumping dollars. If China starts dumping Dollars, so too will Japan, Europe, the royal families of the Middle East.

What is unique about this economic crisis is manifold:

• First- there really is nowhere to turn. Cheap credit fueled bad lending and maxed out consumers. More cheap credit won't help.

• This is a global problem, so its not like this was the asian crisis of a decade ago, where the western economies could wind up the slack. Europe was very hard heat by the 'subprime' mess. An American recession coupled with a collapsed Dollar threatens to burst the Asian China bubble, if not also the India bubble

• Globalization has peaked. We're all in this one together.

Am I selling my stocks? Am I worried about a great depression? No. at least not yet. But this will probably be a very painful recession, and as I said before, it will take some global and domestic restructuring to get ourselves out of this problem. Iw will neither be cheap and easy nor fast.

One last thing. Everyone is cursing those 'feckless irresponsible consumers who borrowed above their means'. Ever wonder why people are so ridden with debt, so deprived of asset value and so dependent on the cheap credit bandwagon? Look at where wages have gone. Productivity has risen, which means a worker is more valuable. But have workers had pay, job security or quality of live increases over the last decade in proportion to what they produce? IE: Are workers getting what they are giving? No! They are being screwed. We have stagnant, fewer benefits, less job security- etc.

People are having to dip into home equity in order to make it through those unemployed months. People are having to take 'novelty' loans out in order to get that first home. Etc, Etc, Etc.

Don't blame the consumer. They're pinned to the wall.

Yeti