Our new thrill attraction: the Fed decision…

The Fed decision is the new thrill attraction of the week. Apparently, people switched from the “Will the Fed cut rates?” debate to the “Will the Fed go large or small with its interest rate cut?”

The fact that the Fed has abandoned its long-time record-low interest rate and abundant liquidity policy brought much larger impact on the EU and developing countries when compared to the US economy. No matter what anyone says, it is a fact that we still couldn’t shake the side effects of 2008/2009 global financial crisis.

I really am astonished to see some people are quite satisfied by the Fed’s rate cut, which is actually a clear indicator of substantial risks for the US economy. Its side effects will definitely affect the world economy.

“You need to avoid making assumptions…”

America has a massive debt pile. To pay off this debt, its economy must run like clockwork. The fact that the Fed has cut rates shouldn’t be good news for anyone. Some people even say that the Americans will be ruined if China sells US treasuries. People who make such comments must live in a fantasy world. No one in their right mind would sell their treasuries to anyone until these treasuries worth zero. Today, the lenders face far greater risk than the borrowers. In an environment filled with people failing to see that, it’s hard to come up with brilliant ideas and achieve breakthrough growth.

I strongly suggest you to avoid making assumptions without fully absorbing the philosophy of economics and the cause and effect relationship in economy. We sadly fail to come to fruition when we try to formulate opinions based on outdated and no longer accurate paradigms.

As Stephen Hawking’s posthumous book says,

“.. .No matter how powerful a computer you have, if you put lousy data in you will get lousy predictions out…”