It's Fed Day

Yeah -- Fed day is finally here. For those of you who are just dying to know where Bonddad stands on this ...

I hereby prognosticate that the Fed will hold a meeting, have a discussion and then issue a policy statement. The policy statement may or may not contain information related to US interest rate policy...

Seriously, I'm not a fan of predicting what the Fed will do. I think it's a pretty useless endeavor. That being said, I think it's important to note that just because the Fed lowers rates doesn't mean that people will lend money to each other. There is a lot of money hoarding right now, especially in the short-term money markets. Financial companies aren't lending to one another because they're concerned about their own exposure to subprime problems and they are also concerned the borrower will take a hit to its respective capital thereby making repaying the loan harder.

In other words, it's not about liquidity, it's about confidence. And the Fed can't do much about that.