Friday, August 31, 2007

The Bernanke Put - Is It For Real?

As Jim Cramer would call him, "Uncle Ben" has declared that the Fed will sweep in and save the day if needed. (Check out the article on Yahoo) I assume that the Fed will be lowering the Fed Funds rate in September. This is a good thing for the markets, at least temporarily. This may help slow the collapse of the markets from the sub-prime credit mess. However, similar to Mr. Greenspan, could Ben Bernake just be holding up a bubble. Supporting the markets is nice, but at the expense of capitalism? The Bernanke Put, if it's real, would remove a lot of risk from the markets.

I'm not saying that Ben Bernanke is doing the wrong thing. I'm just asking the questions. Can the Fed do the right correction without overshooting and creating much more inflation? Could significant Fed action indefinitely hold off further market correction? This remains to be seen.

--------Sincerely, Trevor Stasik.

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