Yeah, I'm pissed at Bernanke. I can't believe he friggin' lowered the interest rate a whole half a point. And the markets cheers.
This is why I'm so completely pissed (and why you should be too):
The whole sub-prime mortgagage collapse. That was a good thing for America. Not for the short term, but a necessary correction. We have ridden a giddy real estate boon for the last, what?, decade? To the point where you are seeing folks making 400%+ profit on homes that they've owned for only 10 years (up to 1000% for those who've owned for 20). Yeah, bully for them, but what's great for the 80s buyer is shit on anyone trying to buy now. Because everything is just too goddamn expensive.
But there was so much liquity (yeah, the mysterious "so much liquidity", which is somewhat connected to the baby boom generation and somewhat connected to the flight of capital away from certain tech sectors after the 2001 correction) that lenders were bending over backwards to lend. So they offered low rates, interest only, to people who should never have qualified. Voila! Sub-prime.
Ok, so then people were all like, well, sub-prime's great, because it allows a person like me to own a home. Yeah, that would be a big fat NEEEEHHHH. Because people like you (and by that, I mean people like me) should never own a home that costs that much. And the worst thing is, the more that people were encouraged to buy, the more they bought, and the frenzy of buying just kept pushing the real estate boom, and kept pushing prices stratospherically higher.
Now, things are cooling off. There is still liquidity, but these investments, like sub-prime, aren't looking so good anymore. Why? Because interest rates are climbing, people can't afford to pay their mortgage and default rates are climbing. It only takes a couple of defaults (% wise) to pretty much wipe out all lending gains for a mortgage lender. And things are interconnected, so defaults leads to less credit which leads to not only less lending to home buyers, but to things like, say, Corporate junk bonds and the like.
But this is why Bernanke is a tool. Because I don't friggin care if a bunch of bankers are going off their nuts. Look at the friggin' Dow. Even before the rate cut, it was still at 13k. Which is like higher than during the whole internet thing. Come the friggin' on!!
No, the problem is that the deals were drying up. The multi-billion dollar deals where a bunch of bankers get a bunch of stupid ass institutional investors to pony up lots and lots of money to buy into really stupid ideas. (Yeah, that would be the institutional investors that manage yours and my 401(k)s.) Because the institutional investors were actually being more cautious.
So Bernanke lowers the fed rate, makes staying in bonds look really really bad and makes damn fool bad investments look good again. Which means, a lot of bankers are gonna be able to get a lot of poor schmucks to buy back into the market again. (Which translates into Bankers cashing out and poor schmucks get stuck holding the pooper scooper.)
And at the same time, he totally devalues the dollar. (Because, US$1 = Canadian$1??? That is so many shades of not right.)
How does this make me friggin' poor? I'll tell you how.
(1) I can buy a hell of a friggin' less when my dollar, which use to buy 1 European chocolate bar, now can only buy 1/2 an European chocolate bar. And just wait until the Chinese Yuan unpegs.
(2) Everything American (including or especially American real estate) now is such a goddamn bargain for foreigners, they will come and outbid Americans on everything, which will also keep real estate prices high.
(3) And when it all pops, guess whose portfolios are gonna be weighing a lot less? That's right, mamas and papas, our wonderful retirement savings, being managed by a bunch of dumbasses, who are right now buying into something that my client (for example) is selling and which is not worth the paper that I wipe my ass with every day.
And that, ladies and gentlemen is why I want my friggin' two dollars (and why I'd spit in Bernanke's eyes if I could get a chance right now).