More on the Rate Cut

The Fed is in a bind. Because, despite the strong GDP report yesterday (Inflated GDP because Inflation was deflated by the Fed), it looks like we have stagnation - Both Inflation and slowing of the economic growth.

Unlike anytime in past, we have the US slowing down, but the other markets (ie. India/China) are still growing. This means US does not have the pricing power on the Oil it once did. Which is one of the reasons oil shooting up even as the US economy slows down.

As for the housing market it keeps getting worse. And now the dire predictions are showing up in the MSM (NY Times). Many blogs have talked about how bad the Housing Market is, but until now, the MSM has only been reporting as if it's only a small correction. Now it's changing.

Ian Sheherdson, the United States economist for High Frequency Economics, a
consulting firm in Valhalla, N.Y. said "This is not a housing correction.
It is a massive, once-in-three-generations bursting of a housing bubble.
It's catastrophe, not a correction."

The fact that the Feds were pressured into rate cut is also getting noticed by MSM.

Had the central bank decided to leave interest rates unchanged, the stock markets would most likely have plunged into a panic — exactly what Fed officials wanted to avoid.

So folks there you have it. The reason for the rate
increase was to avoid a panic. The question is... Have they avoided
the panic or just delayed the inevitable.

http://www.nytimes.com/2007/11/01/business/01fed.html?pagewanted=2&_r=1&ref=busines

It's gotta be bad for the fed when even the Wall St. Journal Opinion piece is killing the FED. Here is the link to the Opinion piece (Dollar Ben) which talks about the fed killing the dollar, and risking inflation.

http://online.wsj.com/article/SB119387944491678507.html?mod=todays_us_opinion

In the Ahead of the Tape column in WSJ, Just Lahart talks about the Fed being pressured by the market.

"It's like monetary policy is being affected by the tantrums of Wall
Street," says James Paulsen, chief investment officer at Wells
Capital Management. "As every parent knows, the worst thing you can do is
give in to a tantrum, because then you get five more of
them."

Isn't this what I talked about earlier? What happens if the market pressures the Fed again?