The Definition of Insanity
Einstein once defined insanity as “doing the same thing over and over again and expecting different results” - as hackneyed as it is to cite. If it is true that this quote has grown in ubiquity without also gaining accuracy, the Fed has surely put such a criticism to rest today when it cut rates by 0.75 points in an “emergency” session. The “emergency,” outside of the recession, was that the Dow was down 464 points in early trading. As an aside, this had me revisiting the trading curbs (safety nets that protect against runs on the market). There is further indication that the Fed will again cut rates at its regular session later in the month. Anyone keeping score knows that the recession in which the U.S. presently finds itself was brought on by artificially low interest rates propagated by the Federal Reserve.
This single-day rate cut is being widely reported as the “biggest short-term cut since October 1984.” The Fed usually cuts in increments of halves or quarters, and even in 1984, the Federal Funds rate was hovering at 10 points. Today’s cut took the rate from 4.25 to 3.5. However, the New York federal reserve lists the cuts in October of 1984 as a “gradual decrease” not occurring in one day. Therefore, today’s action is the largest percentage cut in the history of the Federal Reserve, and likely the biggest one-day cut since Aug. 16, 1982 when the rate went from 11.5 to 10.5.
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