Those cool Fed boyz and my hot bikini wahine
Cazart! While we were all snoozing away out here, the boyz at the Fed lowered interest rates and the stock market jumped like a goosed Garapan geisha. We all expected a reduction in rates, but not this week.
The Big Idea is to create more money, since lower rates increase the amount of loans demanded, which allows banks to pump more money into the economy by making those loans. There are lots of Little Ideas behind this Big Idea, of course, but flogging too much detail gets boring.
Boring is bad, which is why my Tahitian maid wears a new and innovative costume every single day.
Everyone wants to see my topless wahine worker, and everyone except the cruel and fiendish Bin Laden wants to see the United States steer away from its recessionary swoop. Yeah, yeah, I’ve read the economic data, but my anecdotal indicators are what really spook me. My cronies in the transportation industry–a “leading indicator” that tends to point to the near term economic future–are in foul moods these days. Maybe it’s the cheap rum I put in their Christmas fruitcakes.
But maybe not. The fact is, there’s a lot of belt tightening and economic angst in the cargo industry, which is a baaaaad indicator, sort of like your liquored up brother-in-law showing up at your door at 4:30 a.m. unannounced. You know that things are going to go downhill from there.
Conventional wisdom is that an interest rate cut takes six-to-nine-to-twelve (depends on who you’re talking to) months to have any positive effect on the economy. But I’d say a bit of psychology might come into play sooner, and there will be more smiles today than there were yesterday on the faces of the economic cognoscenti.
As for our humble Commonwealth, our business environment is so fouled up that lower interest rates are not, on their own, going to do much for us. They might give existing businesses some breathing room, but, beyond that, I don’t see much coming of it.
Likewise, if the bloodsucking vampires who issue credit cards lower their interest rates a few notches (yeah, right), our households might also get some financial breathing room.
I guarantee you that next week all the talking heads on financial news shows will start speculating about the next cut in rates. The nation is addicted to credit, and, like a California coke whore wanting another railer up her snoot, it’s already eyeing its next cheap fix.
Ah, credit. The world’s economy is built on it. Credit is what money is (no kidding). Consumer loans, business loans, government loans, mortgages, deficits, bonds, and the twenty percent man at the cockfights. Credit, credit, credit.
Let’s just hope that the Fed boyz reacted in time to stave off a recession, and that Uncle Sam keeps rolling in the bucks, some of which are spent on our all-important garment exports.
Actually, my wahine buys garments, too…but a collection of size three thong bikinis isn’t going to support an entire industry. Oh well.
Ed Stephens, Jr. is an economist and columnist for the Saipan Tribune.