Inflating US out of a credit crisis. consumers lose, banks gain!

Federal Reserve, the price-adjusted dollar index is now lower than at any time since the index was first compiled in 1973

TUESDAY, APRIL 08, 2008 7:20 AM IST
http://www.livemint.com/ Wall Street Journal
One of the ways in which the US Federal Reserve has chosen to deal with the credit crisis is to increase inflation in the US. The series of interest rate cuts in the US are designed to lower the short-term cost of money for US banks. At the same time, the interest rate cuts weaken the dollar, make imports into the US more expensive and fan inflationary expectations.
All these factors together prevent long-term interest rates from coming down drastically, so the net result of the cuts in the Fed Funds rate has been a steeper yield curve — short-term rates have fallen more than long-term ones. That’s good for the banks, who borrow short and lend long. Over time, that will enable banks to make profits and recapitalize their balance sheets.
In short, the US Fed is trying to inflate its way out of the crisis. That, in a nutshell, is the view held by many experts in the field, including Satyajit Das, the authority on credit derivatives.
Unfortunately, while lower interest rates may be a solution to the problems of US banks, it seems to have become a scourge to the rest of the world, in particular to developing countries...."

Norton's comment: This article from India really connects the dots on what is proceeding as a conscious plan by US administration and FED. Sorry but the consumer, middle class lose AGAIN and the banks win by recapitalizing their balance sheets. Consider how you can counter these affects. Carefully consider buying commodities including precious metals including gold investments. the market is very volatile now so it must be done with precautions looking to the long term view. If you do not want a stock for 5 years or more then don't buy it. I have a portion of my portfolio in counter cyclical investments or international stock / EFTs in economies that are strong and whose currency is appreciating relative to the US dollar.