What will the FED do next, what is left for them?

Implications: The Fed does not know what to do after they reduce interest tomorrow. This follows on the tail of the bailout of Bear Sterns in a sweet heart deal with JP Morgan/ Chase, and the opening of the FED window to non-depositories. The next issue and crisis is going to be the dollar value and its impact on the economy. Gas is going to continue up as will most other costs that are fuel dependent. What will be the impact as a G-7 goes off the dollar and say to the EURO?

Analysis: So our financial system is in a crisis and everyone will admit it now. The Fed has pulled out its last gun (maybe) in the effort to stop the potential for a failed financial system. We are now hearing rumblings of a new RTC. I wonder if that will work in all of the credit markets?

Of course other credit markets are in trouble along with the exposure to mortgages there is the risk in autos, cards, commercial and especially Home Equities. The amazing thing being there are only a few that have big exposure to all five areas including 1st mortgages. The bad news is that they are the same investment banks reeling from 1st mortgages. Even worse is the companies that are risk adverse, B o A and Chase, that have exposure to several of these areas. Any one of which in a bad year could significantly hurt the institutions earnings. The end result is a pretty strong prediction of ongoing poor performance across the financial markets.

When we layer in the economy for average "Joe" consumer, the picture even gets worse. As the Fed lowers interest the trend has been for an increase in fuel prices. So Joe consumer will pay more at the pump and for every item purchased. The borrower will retrench further having tapped all equity or been denied access to remaining equity. The result, "The just do it" and the "Live Richly"era is at an end.

The scariest outcome of all will be if one of the G-7 decides to go off the dollar. I read in a news service this morning of a Washington DC hot dog vendor that is now accepting Euro's. How is your German these days?