It is Fed that made the wrong decisions which led to today’s crisis. If it screws up this time, things can be really horrifying.
To boost (or save) the economy, a tax cute and low interest rate are needed. Interest rate has been reduced to almost 0, leaving no space for the Fed to do any adjustment. But if the upcoming new gov, as it plans, is going to offer a temporary tax rebate as a solution, the economy is not going to recover .
From an average person’s perspective. if my investment fell almost 50%, the more you give me, the more I am going to save. why? Because I’m in panic! I’m not sure how the future would be, but I Do know that this extra income is just Temporary. So I’d better save so that I can have a chance of surviving if things turn from worse to ugly. The Gov is telling us if we all spend this temporary extra amount of money at the same time, we will save the economy. I don’t know, and I don’t care. All I know is that there is definitely bad-ass guy out there saving and waiting for us to spend, and I am not going to be this national hero. In a nutshell, without positive long-term future prospects, I save instead of investing.
