A Blog Reporting on Reports, Conjecture,and Opinions on International Affairs

Thursday, February 28, 2008

Cutting Interests Rates won't Stave off Recession.

The Federal Reserve under Chairman Ben Bernanke show signs that they might slash interests rates further in order to stave off recession. At a Senate Banking Committee session, he told the Senate that inflation will come down shortly and that cutting the interest rates will help prevent a recession from occurring. The economic slow down has been widely blamed on the mortgage crisis that appears far from abating. Reducing the interest rates will increase the supply of money in the economy and make loans cheaper, which in theory, could encourage job growth and increase consumer spending. IHT

The negative effect of lowering the rate is that it can lead to inflation. Inflation rate has reached the 7% margin making it the largest increase in inflation since 1982. Its been cause by the rise in demand in food, high oil prices, biofuel craze, etc. The weakness in the US dollar is another reason why the prices of consumer goods are more expensive. The dollar is down a $1.52 against the Euro. The dollar's buying power is lessening making the price of oil rise above $100 a barrel. This measure will not stop the dollar from depreciating, in fact it will most likely continue to depreciate. This means that American consumers will have to expect to may more. An increase in inflation is not going to help consumer confidence, which is a pivotal in stimulating the economy.

The Fed slashed interest rates to get us out of the 2001 recession and for the most part it succeeded, although it did lead us to the present mortgage crisis. Inflation was increasing during this time but it did not accelerate or threaten economic growth. The dollar was depreciating but not in the levels we have seen in the passed six months. The low interest rates at the time encouraged people to buy homes and banks handed out loans to consumers who in reality could not afford them. Credit card debt has also risen but credit card interests rates are not affected by the Fed's cuts. These cuts in rates may increase American's debt and not help them out of it.

Its quite a risk to cut rates with the rise in inflation. People may have to choose between foreclosure or bread on the table. It is only going to hurt our wallets and damage the economy further . Cutting interests rates is not the remedy to stave off recession. It may only worsen it.

Monday, February 25, 2008

Did Syria Make a Deal with the Democrats?

On February 12, two major events occurred in the Syrian capital of Damascus. First, with little press coverage, Zibignew Brezinski Jimmy Carter's former National Security Advisor was visiting President Assad. He led a delegation from the think tank, RAND Corp, to Damascus. What is notable about Jimmy Carter's national security advisor is that he is also a foreign policy adviser to current Democratic presidential candidate Barack Obama. That same delegation also includes Hassan Namazee, who is one of Hillary Clinton's foreign policy advisors- Debka. The other more prominent story, terror mastermind Imad Mughniyeh of Hezbollah was killed in a car bomb. Prior to 9/11 Mughniyeh was known as the terrorist who killed the most Americans.

Not much is known about what Brezinski said during his trip to Damascus but in the other side of town not much was known how Hezbollah terrorist mastermind Imad Mughniyeh was killed in a car bomb. Hezbollah and Syria quickly blamed Israel, suprisingly, Mughniyeh's widow blamed Syria for the assassination-aki Its also strange how Syrian authorities have not allowed Hezbollah or Iranian investigators to investigte the scene.

The assassination might have been a gift to the Democratic presidential candidates to show Obama and Clinton that Assad would work with them if one of them became president. It illustrates the fact that Assad could give away some of his precious assets in order to negotiate with the US. It would be interesting to see what Brezinski said to Assad and if a deal would be made to renew relations with Syria once the next president reaches office.