"Not only does [the lowering of interest rates] help in reducing the actual borrowing costs — home equity loans, credit cards or your auto loan — but it improves the affordability, so more people are eligible for credit because their interest payments are lower," said Brian Bethune, chief financial economist for Global Insight, a Lexington, Mass.-based forecasting service.
He said that will help improve chances that borrowers with borderline eligibility will qualify for loans.
Now I know I'm not a highly respected economist regularly quoted in the Washington Post or anything, but isn't a policy of encouraging banks to give loans to people of questionable qualifications exactly what led the U.S. into its current economic malaise?
But it would appear Fed Chairman Ben Bernanke has decided to more or less repeate the Greenspan policy of providing easy money to banks (also tried during the 1920s before another calamitous economic period) that will then try to make a quick buck by lending it to people they probably shouldn't, all in an attempt to inflate the economy back to its previous unrealistic heights. In the short-term, this may indeed spur another artificial boom and the appearance of prosperity -- maybe. But when the inevitable bust comes, it won't be pretty, especially for those on fixed incomes who will have to deal with the likely prospect of significant inflation.
Yet this is the serious monetary policy backed by everyone from George W. Bush to Paul Krugman, which means whenever the blowback of the Fed's actions finally hits nobody will be to blame, except those Americans not patriotic enough to go out and buy a new high-definition television they can't afford.