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Fed's Half-point Cut Sign of Desperation! Next ...

Interest-Rates / US Interest Rates Sep 19, 2007 - 11:53 AM GMT

By: Money_and_Markets

Interest-Rates Martin Weiss writes: Yesterday, in our Monday issue of Money and Markets , we told you about the massive and unanimous pressures on Fed Chairman Ben Bernanke to cut interest rates by a half point — the desperate demands of home builders, the panicky screams from mortgage lenders and the wailing cries from Wall Street.


Yesterday, Mr. Bernanke caved in to those demands.

Not only did he take the highly unusual step of slashing the Fed funds rate by a half point, but he also cut the discount rate by the same amount, on top of a similar cut just last month. Not only did he cut interest rates, but in their official statement, the Fed confirmed and underscored everything we've been telling you: This crisis is big. It's getting bigger. And you haven't seen anything yet.

As expected, Wall Street has responded with glee — for now. But they're ignoring the obvious. They're ignoring that the horses have left the barn, that the housing and mortgage collapses are already too far gone to reverse with interest rates alone.

My view: What good are lower Fed funds rates if lenders are too frightened to write new mortgages? And what good is it if banks can borrow more cheaply when nearly everyone else — especially home buyers — either can't get loans at all or have to pay through the nose when they do?

Meanwhile, as we explain in our emergency video summit, for foreign investors holding U.S. dollar investments, Bernanke's action today is a firm slap in the face — and in the pocketbook. Foreign investors are being asked to take MORE risk for their money. But they're also being asked to accept LESS yield on their money. Not exactly a formula for supporting the dollar! Quite to the contrary, it represents one of the gravest self-inflicted attacks on the dollar in modern times.

That's why gold is surging in response to today's rate cut. That's why foreign currencies will also surge. And that's why I believe this is a massive profit opportunity.

Stay tuned. This drama is just beginning to unfold. And it's following our script to the letter.

Good luck and God bless!

by Martin Weiss

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

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