Global Rate Cut

The Fed has cut interest rates by a half percentage point to 1.5% in hopes to spur economic activity by injecting money into the economy. Central banks around the world have followed suit lowering their rates by 50 basis points as well. The financial crisis has spread worldwide infecting countries from Australia, Canada, Germany, and the list goes on. Over the summer there was talk of decoupling, which states that the U.S. doesn't have as big of impact on other financial markets as it used. This goes back to the idea that when the U.S. economy "sneezes" the whole world gets a cold. The U.S. doesn't have a cold; it is in cardiac arrest. Action needs to be taken immediately to put trust and faith into the credit markets. This is a step in the right direction and so is the bailout plan but we need to start creating markets for stressed assets immediately.

The good news is that we are not in the mess alone. Other countries have been hit hard and are experiencing similar economic activity as the United States. In order to get out of the mess it will take a collaborative effort, however the U.S. must take the lead role. We are running out of "bullets" but we also must remember that the measures taken by the Fed don't immediately serve their purpose because policy works with a lag.