In an attempt to save the US economy, interest rates were cut down Sunday allowing more loans to take place. For those who may not be in the know, when interest rates go down, more people are encouraged to borrow money which will stimulate consumer spending. Consumer spending allows for investments and consumption that will allow companies to function properly.
With the interest rate being cut down, this allowed the Federal Reserve to offer its service to Wall Street investors as the lender of last resort, in the hopes to stabilize the worsening credit crisis. This was done to salvage Bear Stearns from collapsing.
Apart from this, the dollar continues to devalue. Considering all factors, this should improve the economy. Although it may seem detrimental that the purchasing power of the dollar is less, greater foreign investment is expected to occur with the weakening of the dollar. The plummeting of oil prices as well has made petroleum based industries in a better position and finally the cutting down of interest rates is supposed to stimulate consumer spending to jumpstart the US economy.
So everything is being done to stabilize the economic situation. Why then do the market and the DOW continue to go down? What’s going on? Is it at all possible that the government is not telling the people the whole truth? Are they hiding something?
It would seem that apart from whatever it is that is said in the news there is a bigger and hidden factor that is causing the market to go down. This is not natural. I do not believe that the government is not as forthright as they should be regarding the credit crisis. I believe the amount of credit owed is more than what the government has declared and this is what is causing the economy to continuously go down.
I expect the market to crash on Monday next week despite all the efforts being exerted to save it. Let’s hope I am wrong.
