What is this I'm hearing? Aggressive rate cuts? Oh sure, they are coming...no doubt about it. The futures markets are pointing towards it, too. Ben Bernanke is on record saying "the Fed will provide ample liquidity and do whatever it takes support the economy." Pretty much a slamdunk in my book. But is this the answer? How far have we come with this nonsense in a year's time? For heaven's sake, rates have been cut 3.25% in about a year now, yet that has not been the answer. Shouldn't that have been enough? Currently at 2% fed funds, it seems we are likely to see those 1% rates again that got us into this mess in the first place. Maybe Ron Paul was right after all; too much power to the Fed is a dangerous thing. Bernanke is more set on trying to shore up confidence than to solve the real problems for which the answer is still floating out there. Meanwhile funds continue to flow into the system at an enormous rate.

TARP is Not a Cover, It Reveals

The new plan to buy mortgages by the government from banks is called TARP. It might as well be called CRAP or even LATE. On the hook are the taxpayers once again, as the buyers of last resort. Secretary Paulson talks of a 'good investment' by the American people. Since when did he have control over our investments? Did you ask him to invest your tax dollars on your behalf? He tells us we could make a profit on this deal, and that sounds nice. However this is a clear bailout plan...as some will inevitably be rewarded (even more) for punishing behavior.

It's Still About the Economy, and It's Not Good

Bad news on the horizon and it's only just getting started. The economy could very well be in a recession, a potentially powerful pullback that has global effects. Unemployment is creeping higher, job creation is shallow, manufacturing is slowing, global demand for commodities and services is weak and the consumer is tapped out. On top of that, the housing market and credit are still a mess. Until some improvement appears the stock market will be under severe pressure. Global markets are tied together in a way that if the US sneezes everyone else catches a cold. For reference, the last recession was a shallow one, only lasting one cycle, this one could be extended into 2009. Earnings are about to come out for 3rd quarter, and they likely to be the worst in the history of mankind.

Monstrous Risk, Little Room for Failure

As seen this past week or so, the market is making it known that any bailout plan is not the silver bullet. Since being announced on Sept 19, the Dow Industrials have lost up to 2000 points, or nearly 16%. That is nearly a crash, the one legislators were trying to avoid. They took their time getting it done, too, risking bigger losses and showing themselves as selfish, foolish and narrow-minded in the process. In their hurry-up offense the bill was passed. Mr. and Mrs. Middle America, who will have their voices heard in about a month (Election Day), are completely disgusted, worn out and fed up with Washington. No surprise, either, but if this plan does not work, or if there is a call for more funds, there will be hell to pay.

Price Headley is the founder and chief analyst of BigTrends.com.