Another Round Of Rate Cut?

Stock market all over Asia tumble hard Monday with Nikkei dropping 6% and hang seng dropping more than 1500 points. The only Asia market that end up in the positive territory is South Korea as their Central Bank cut the interest rate by 75 basis point to 4.25%.Dow Future currently drop 309 point indicate another round of sell off unless some "help" by uncle Sam.

So now everybody say we need another round of rate cut. Fed will announce it on Wednesday and UK PM also signal that rate cut is needed. According to Bloomberg, rate cut concencus is 50 basis point to 1%.

Fed Fund Future show that 50% chance of a 50 basis point cut, 30% chance of a 75 basis point cut, 10% chance each on 25 basis point cut and 100 basis point cut. Fed fund future also show 99% of a rate cut this Wednesday.

I really can't understand what are US officials thinking. Even Alan Greenspan admitted that he was partially wrong after the dot-com bubble burst which he apply a silly monetary policy(interest rate at 1%). This stupid policy create the credit bubble that burst 1 year ago and help drag down several banks and a insurance company.

However despite alan greenspan speech, Bernanke is trying to do the exact thing now. If Fed cut 50 basis point, we will have 1% interest rate exactly like 2005. Imagine if a dot-com bubble turn into this horrific credit bubble which was so much bigger, what will a credit bubble turn into? A bigger credit bubble?

No one knows the answer but we know it will create something even worse. Why can't Fed just lay their hands off and let the bubble go away so that we will have a fresh start. As long as fed keep intervening, they will create bigger and worse bubble.

Yes, we will have severe recession or even a depression of fed let free market system in control but at least we still have a small chance of survival. What fed do will certainly kill the biggest economy in the world.

Here is a sentence i picked from cnbc.com about market sell off of 20th and 21st century:

Crash of 1929

The stock market crash of 1929 saw the market fall 12.8 percent on Oct. 28, 1929, known as “Black Monday," but the market fell almost as sharply the day after. The crash contributed to the Great Depression of the 1930s and many also consider it part of a two-decade bear market.

The crash contributed to the Great Depression of the 1930s???????????

How can the crash contributed to the GD? the stock market crash didn't cause the Great Depression--the Great Depression caused the stock market crash. In other word, stock market is the indicator of economic condition. If Economy is sound, stock market is sound and vice versa. So Black Monday happened because of bad economic condition and not contribute to GD.

So for those who look for bottom, you will have to wait some more. As long as central bank intervene, market will continue to fall.