Interest rate cut was bad decision

May 10, 2008 10:22 pm

— The very first thing one learns in economic history is that a strong dollar and a stable money supply are mandatory to promote long-term prosperity and maximum growth.
The Federal Reserve has completely ignored this key economic principle in dealing with the current sluggish economy and failing financial markets. The exploding fiscal deficits and financial woes in a number of key areas has eroded confidence in the dollar. Until fiscal and monetary policies change, there will be future inflation and higher interest rates.
I feel the Fed was very wrong in allowing the dollar to lose so much value on the world market. I feel it was a bad decision to cut interest rates as a solution. What has this accomplished over several months? Inflation is rampant in all areas, commodity and consumer prices are soaring, the dollar weakens daily against the Euro and other currencies and the country is in a recession. If Milton Friedman were to speak to the Federal Reserve governors, he would instruct them to start a systematic increase in interest rates, to bring the dollar back to par value immediately. He might also remind them that inflation and an unstable dollar are mortal enemies of prosperity.
James W. Clark
Anderson