Here he comes to save the day

The last time we had a simultaneous decline in U.S. household wealth and income was in 1974. One might suspect that the printing of dollars to pay for the Vietnam war had something to do with the inflation and stagnation that ensued and that we might be facing a seriously frustrating repeat of a situation that launched an anti-government philosophy and gave us Ronald Reagan and the "debt doesn't matter" idiocy.

But I digress. Today's rate cut by the Fed, following close upon the heels of another panicked attempt to avoid a stock market crash has had an effect so far this afternoon, but as Robert Shiller, a Yale University economist says,

"The Fed is going to have to keep slashing rates, probably below inflation,''

and that may fuel a continuation of the consumer borrowing and spending frenzy that got us into this mess; a frenzy that mirrors the myth and machismo driven borrow and spend Bush philosophy.

I've already had e-mails from friends today that seem to be some kind of sigh of relief that Bernanke's "bailout" will, like Mighty Mouse, save the day. I'm not so sure we can look to cartoon characters for redemption, as we have been doing since George took office. When interest rates are at the level of inflation, a level to which this latest reactionary rate cut may bring us, a repeat of the housing bubble seems likely. According to Craig Torres and Simon Kennedy writing for Bloomberg yesterday:

"The last time the Fed pushed real rates so low was in 2005, in the middle of the three-year housing bubble, when consumers took on $2.9 trillion in new home-loan debt, the biggest increase of any three-year period on record."

But I guess that's what being a Reaganite conservative today is all about: endless repetitions of a failed formula and attacks on any suggestion of any actual fiscal conservatism.