How About Not Borrowing and Saving More

There are a wide range of opinions about whether or not the US is in a recession, about to enter a recession, or whether the housing crisis is simply a blip on the road to further economic expansion and growth. But the warning signs are clear and evident.

With an interest rate cut seeming certain, and soon, Fed chairman Ben Bernanke had this to say.

“The outlook for real activity in 2008 has worsened,” Mr. Bernanke said after describing all the forces dragging down the economy. “We stand ready to take substantive additional actions as needed to support growth and to provide adequate insurance against downside risks.”

The interest rate, currently at 4.25%, could be cut to 3% or lower by summer. I'm not an economist, nor am I well-educated about the pros and cons and ramifications, but the rationale triggers a few alarms in my head.

The goal would be to get people to borrow and spend more.

I don't know. There is something very troubling about that. It reeks of more waving of the magic wand and I fear the wand has lost its charge.

In reading the comments linked to the article, it seems I am not alone in my concern.

Fed rate cuts will have little effect on slowing the descent into recession. They may spur some increase in capital spending, but this will be relatively small compared to the decline in consumer spending that's occurring because of increased unemployment and a more pessimistic public mood.

Another suck-up to Wall Street and a blow to Main Street. the cause of the recession is the price of oil, which will be driven still higher by this move, which clearly undermines the greenback. A stagflationary move indeed!

Boy, this is great. It will allow the geniuses of Wall Street to grow the federal debt, while lending ordinary citizens the low interest shovels they need to dig themselves so deeply into debt that the Masters of the Universe can award themselves their fifty gazillion dollar bonuses this year.

Many Americans are facing a challenge with expenses for basic necessities with little, if any, remaining for discretionary spending. I happen to be one of those with little desire to embark upon an unnecessary spending spree, draining my pockets in order to improve the bottom line of big-box retailers and allowing overpaid CEOs to save a little face and avoid having their assholes ripped by disgruntled stockholders.

Screw that. My current inclination is to play it conservatively, be frugal, and look out for my own economic best interests first. Buying things I don't need on borrowed money is reckless. Having to borrow money for things I do need is a big red flag.