Are the Fed's recent interest rate cuts good for consumers?

Yes

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by skywriting-on-vapors

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Let's SPEND our way forward, I say, to repudiate the pundits, politicians and public policy "experts" who proclaim an economic recession to be inevitable and unavoidable.

Yes, you read that right. Let's spend. And spend. And spend!

The Federal Reserve's repeated rate cuts in the prime lending rate of late is a great thing, and suggests to my mind that it's high time we look on such interventionist actions as reasons to actually spend MORE in the fundamentally important ways that matter when the politicians, public policy and economic reform punditsplus the plethora of radio and TV talking heads, show hosts and such proclaim a looming economic recession or downturnhowever cleverly worded and positioned with euphemisms, double-speak and gobbledygook.

You see, if you examine the Fed's rate cuts solely on the basis of what they representthe presence of economic ills that demand government intervention to the extent that it's necessary to make mid-course adjustments, jump-start and otherwise apply measures with a gentle hand in ways that restore economic health and vibrancy to the economy without over-extended micromanagement and counterproductive manipulation.

There's absolutely no question that such intervention on the part of the Fed points to fundamental economic problems. A rate cutor conversely, an increaseat once indicates major macroeconomic flaws in the nation's web of wondrously complex and intricately interwoven marketplace transactions and money-rooted activities, be it trading and share prices on Wall Street, pork belly prices and commodities futures trading in Chicago, or the overall general financial health of specific financial enterprises, corporate businesses and other interestspublic and privatelinked into the multi-dimensional and globally-wired matrix of money market and credit/debt-based transactional relationships.

If we can accept as a premise that ALL Fed interventionbe it a rate cut, rate increase, or perhaps a decision to refrain from a rate change at allis predicated on the fact that there are some fundamentally serious econometric issues that need to be addressed, and which by their very nature are greater than the sum parts of individual marketplace players to intervene, remedy or otherwise repair and adjust themselves. It's noble of Wal-mart, for example, to announce its intent as an individual company and responsible corporate citizen to step up to the plate, walk the talk of its CSR commitment, and strive for whatever motive to do its humble part for the economy. But the stark reality is that Wal-mart's capacity and reach-out leverage to make a significant and substantial economic stimulus difference to the US- and dollar-centric global economywith its trillions upon trillions at stakeis but a teeny, tiny droplet of water in the proverbial ocean-sized bucket.

The type of spending I have in mind is not necessarily what may now be forming as an idea or concept in your mind as you read this, and for that drawback we must blame the drawback of language and the availability of words, in this case the word "spending", to prove themselves able to hurdle the weakness and often utter futility in trying to convey a concise point with something that nears precise specificity, which is what's called for here to make the point absolutely crystal clear. Just as there's truth to the adage that not all that glitters is gold, not all "spending" requires the use of spastic plastic or Treasury printed moolah in the transaction. So allow me to first briefly explain what is meant here by "spending" and its special use in all that follows below.

The type of "spending" I refer to here concerns itself with the intellectual output and transactional labors of the mind as a means to channel behavior that brings desirable macroeconomic results, beginning as a trickle at the personal or "micro-player" level and then, by consequence and confluence, at the macro socio-economic levelthe heights of stratospheric altitude from which perspective and discernible patterns of economic performance and such are measured by the sum total of the most fundamentally key and influential individual human inputs, which are the products of sanity, rational thinking and responsible actions on the part of all citizens, young and old as well as rich and poor, extending to the dizzying array of companies, governments, analysts, traders, and so forth. The point is that all players are inextricably linked into a de-facto world wide financial and economic web such that, manifest weakness or undesirable behavior of thought on the part of any single participant can wreak havoc, causing a chain reaction of negativity that sparks yet further similar irrationality like toppling dominoes throughout the superstructure and elemental economic infrastructure.

Think of it this way, to borrow the infamous line from one of America's famous revolutionaries, Thomas Payne, who spoke truthfully and with great wisdom when he observed that fellow colonists not behind the letter and spirit of conspiracy to wage a war of independence against King George III and England most assuredly would, if not caught and taken to the gallows to hang together, would most assuredly all hang anyway, but separately. To my mind, so it goes also, though I profess no public policy experience or credentials as an econometrician to say so, with our economic or any other macro-scaled woes.

Of course, many will be quick to counter with the argument that Payne's sentiments were expressed in a wholly different context and purpose, having zero if anything to do with discussion of prime lending rate cuts and the Federal Reserve's unquestioned role as quarterback of our world's modern dollar-centric global economyone that even in their wildest dreams and imaginings would have been an enigma to Payne and his revolutionary-minded contemporaries, despite the undisputed resonance of what he had to say being consonant with and poignant in trying to express the point about our collective need nowadays to "hang together", as well as to "spend" in all the positive ways that matterat least insofar as national and supra-national economic activity and marketplace health and government intervention, public policy and other interventionist corrective measures are concerned.

It's all too easy to fall victim to, mindlessly accept and actually come to believe in the doom and gloom proclamationsor worsetouted by all the many talking heads, economic and business news analysts, financial page columnists, and countless others who waft words our way every day about economic woes that threaten to grow from a drafty and discomforting breeze into a full, gale-force wind of disaster. Those who buy into and accept without question or thinking the veracity of such pervasive pessimism, such prattling predictions, are more than ignorant and unwittingly victims to the pith of the pitfalls in what's being perpetrated. Far worse is that, to the extent that vast numbers of people buy into this cry of an espied economic grim reaper lurking just over the horizon, such thinkingemerging as it does from that great cradle of the mind, where all that we are has the potential to transform and morph itself wellspring of rational and irrational thought and cognitive feelingcan be freely unleashed to feed most fatally the predicted predicament itself, that which need NOT be a self-fulfilling prophecy, but which is capable of being manifested precisely because so many believe it to be unavoidable, well on the way to us as a computer-modeled and discernible trend, or perhaps as couched by others to be a flatly but unsubstantiated assertion of "empirical fact", or dialectical pattern or history, and so onand therefore, on such a scientific or metrics-proven basis, somehow true.

I for one beg to differ with any who believe that Fed rate cuts are, in and of themselves, necessarily a bad thing.

Let's be clear about this, for to borrow from the wisdom and truth of another age-old adagethat which instructs that no one can be a prophet in their own landwe must be frank with one another, you and I, and especially so because I've already admitted that I have no academic credentials or any other formal training, education or experience to pontificate on economic matters. The point is as plain and simple as the nose on our respective faces. You KNOW it's true that it really doesn't take a rocket scientist or economist to realize that, when human behavior is infused into econometric or any other models and "computations" thereby become prone to irregularities, dissonances and in other fundamental ways are reshaped by this human behavior itself as a variable in the equation, anything at all can, will and DOES happengood, bad or otherwise, to alter the very hypotheses, models and all else that underpin super-computing and econometric modeling, econometric analysis and research, and the rest.

To ignore the human element in any economic equation is the mathematical equivalent of trying to locate an ebony-colored object in a pitch-black darkroom, which is to imply that in the absence of the human element as a variable means that what is arguable the most crucial of ALL econometric variables is invariably lost, absent from or simply unable to be redacted as a number to be included in today's sophisticated modeling and super-computer computation matrices, at least at the macro-economic level under discussion here, and more specifically in the context of rate cuts and such alongside the Fed's and the motives behind as well as the implications of its interventionist actions.

And so there it is with our American economy, or any other economy. If the economic populacecommon man and gargantuan global corporate giant alikedo not predominantly predispose themselves to expect the best but be prepared for the worst, striving in daily thought and deed to eschew all the doom and gloom proclamations-hen I believe there's hope and promise for a healthily sustained and improving economic tomorrow for all. Conversely, to the extent or degree we accept that economic doom and gloom are inevitably astride their mounts even now as the menacing four horses of the economic apocalypsesnapping wallets and checkbooks shut, cutting up the plastic and shredding evidence of other instrumentswe reap what we sow, which is an errant and avoidable self-fulfilling prophecy. Put another way, if we fail to be strident, positive and earnest in out everyday pursuits, be they large in the trillions or small to that stack of pennies that'll be spent to tip the bagboy at the grocery store, we foolishly deceive and unflinchingly fail ourselves. If in ANY way we dither, doubt, mutter and sputter nothing but negatives, if all we can do with our negative thoughts (whether or not they're shaped and influenced by inputs from the pundits, politicians and prattling armchair policy makers), we actually delude ourselves by falling back into such a self-destructive fortress mentality whereby "saving" per se is not so much the aim as to flat-out curb, slash and if possible STOP all spending.

The results of such self-inflicted myopia? Not surprisingly, be ready for an assuredly negative outcome, measured in macro-economic data and fancy-shmansky econometric statistical modelsnone of which can pinpoint the variables for and accurately measure the fallout of human thought process, and the ensuing actions and indeed non-actions which can be observed through macro-altered saving, spending and other actions, but all of which will reinforce and themselves feed a self-fulfilling prophecy with already inaccurate or corrupted datain direct and inversely equal proportion in the opposite direction to all the inert positive possibilities outlined above. As a practical matter, what happens here on the negative side is that, instead of manifesting individual human thoughts as words, deeds and actions that fuel economic vitality and through plain old positivism, on the negative side we'll only see a tendency for the multiplier effectrate at which the money we spend literally touches the hands of thousands if not millions of others, coursing like blood through the economic body of America as if its arteries and veins were dependent upon it for the sustenance of its very life, which it is. To buy into widespread but unsubstantiated negativity, become an active and vocal participant in the naysaying, or worseto withdraw into a cabin in the economic woodsis to essentially bear responsibility for playing a part in bringing on the very economic monsters and menaces we all seek to avoidand keep us out of the bear's caveIn the first place.

Think of it this way: do you really drive a manual shift vehicle by having thoughts in mind to suddenly throw the gearshift into first-gear from fifth gear, or more jarringly actually trying to thrust your hurtling mass of metal into reverse? Your answer, if rational, is likely not. This being the case, why then would you allow yourself to be lulled into the lunacy ofto use the awkward analogythrowing your personal or business economic interests, finances and so forth into the equivalent of first gear, or worse, complete reverse? To my mind, it just doesn't make any sensethough I readily admit that many folk often have a great deal more money than cents!

Okay. We've got the issue framed, so now what do we do about it? We SPEND! That's rightwe spend our mental energies on finding every conceivable way to avoid falling into the mindless trap of economic self-fulfilling prophecy. This is our individual responsibilityto ourselves, families and loved ones, our neighbors, and even strangers, who of course are the millions of other citizens, at home and abroad, with whom we share a common destiny, tethered and bound up in interdependence in today's global village and equally global economyso let's not leave to the Federal Reserve or anything or anyone else what we ourselves can do to help ourselves, which is to spend time and thought process, not necessarily money, doing the things we can to improve our collective economic lot and circumstances.

Here are but a few spending tips, suggestions and recommendations to ponder that may prove effective at getting all of us, individually and collectively, moving together in unison and in pursuit of our positive and enlightened self-fulfillment of economic reality:

1. Spend more time seeking out and listening to positive economic news analysis, trend reporting, economic forecasts and predictions, and such.

2. Spend some time and energy by sharing with others your positive thoughts abut the economyin personal, micro and macroeconomic termsand let others know, even if its an unpopular or non-PC position to take, that you disagree with the talking heads, armchair public and economic policy pundits and their ilk.

3. Spend some time and energy seeking out opportunities to inform others in proactive ways, be they family and friends or peers and colleagues in the workplace, that you're one who believes in the power of ONEone who can and does make a difference in terms of what you're personally able to and can and will do as an individual to benefit your company, the local and national economies, and that you'll be one to resist being badgered or otherwise influenced with silver-tongued words into a fortress mentality, fallback position in a backwoods cabin, or comfy bear cave subsistence-as-you-s leep, skinflint-as-a-Scroo ge existence in full economic retreat.

4. Spend a few extra pennies, nickels, dimes or quartersor even large denominated greenbacks if you can spare themat every opportunity that presents itself, bearing in mind that such must be scaled and appropriate to the occasion, transaction or circumstance at hand.

5. Spend more time and energy going out of your way to BUY AMERICAN (or if you're of another nation, substitute your nation's namesake here). Look for goods and services that are American-made, US sourced and supplied, and so on. Don't misconstrue and take this as a cue to go over the top. Don't be so foolish as to blacklist or boycott foreign goods and services, like the proverbial penny one sticks in their eye to keep the sunshine out. The point here is that, to the extent you can, PREFER US-made goods and services to infuse new money and labor stimuli into the economy, inject it with continued vibrancy and growth potential, and maintain the momentum of the economy's crucial underlying macroeconomic money supply-circulation multiplier effect.

I believe that if each one of us would step back, think about the Federal Reserve's rate cuts, or anything else for that matter that has a fundamental influence on our individual and collective economic behaviorour thoughts, actions, words and deedswe'd without question to incline, I opine, in the direction of the positive and half-full economic glass that's filling, rather than the glass which the negative-minded naysayers proclaim to be only half-full, emptying and therefore "fact" as a harbinger of inevitable and inexorable economic doom and gloom to come.

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