Federal Reserve & Interest Rates

There are some concerns about the record lows of the Foreign Exchange worth of the dollar. The United States currency has been weak to the Euro in particular for quite some time, reaching an all time low with the Euro valued at $1.40.

There are a variety of factors that have contributed to the falling value of the dollar. The most obvious contributing factors have been the long term tax cuts, energy prices and the war in Iraq.

The Euro is reaching all time highs, and some are saying that it is not so much that the dollar is slipping, but the Euro is rising. While that has been a struggle for years, there is a rise in the Canadian dollar as well. For the first time in about 30 years, the Canadian dollar valued at a 1 to 1 ratio with the United States dollar.

The recent rate cut by the Federal Open Market Committee has little to do with the continued slip of the dollar. For the time being, it was still a necessary move to keep the United States economy, not necessarily thriving, but more like staying afloat with a life preserver on.

The facts and figures show that under the current presidency, compared to the previous one, the economy has been on a downward slope. “Clinton did in fact produce favorable results in jobs, unemployment, national debt, poverty, and important economic factors like property ownership. Under the Bush Administration, every indicator but Productivity has slipped significantly.”

The comparison of the economic performance of the past is neither here nor there, but the fact of the matter is, things are pretty vulnerable at this point. Chairman of the Federal Reserve Ben S. Bernanke stated in his recent testimony on Subprime mortgage lending and mitigating foreclosures that “Recent developments in financial markets have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.”

In his speech, he reviewed most of what we already know. The lenders have suffered losses and the Federal Reserve are investigating lending practices. The Fed is encouraging moves that work with borrowers to help avoid delinquency and unnecessary foreclosures.

The only thing we can do now is wait. I hope and pray that the economy holds up. The strong implications of instability of the economy and the possibility of recession still linger above our country, and it is rather unsettling.