Federal Reserve Sees Economy Slowing in 2008

The Federal Reserve seems behind the times. The economy has already slowed for most normal people.

The Federal Reserve said that the decision to cut a key interest rate last month was a "close call," according to minutes from that meeting released Tuesday.

But in a new economic outlook, the central bank also lowered its growth target for the economy in 2008, raising hopes that the Fed will cut rates again when it meets in December.

The Fed indicated in an addendum to its minutes that it now expects the economy to grow at about a 1.8 percent to 2.5 percent rate next year, down from a forecast in June of 2.5 percent to 2.75 percent growth.

"I am surprised that their forecast for next year is as low as it is," said David Resler, chief economist of Nomura Securities International Inc. "The forecast is considerably weaker than it had been and that is the most significant development in this report."

Why is anyone surprised at this forecast. I am surprised it calls for any growth at all. It means the White House has influenced this report and does not want to forecast a recession as that would torpedo the hopes of Republican candidates nationwide.

A recession is already in place in many areas of the country such as Ohio and Michigan. The subprime crisis is threatening the economy of Florida, California, Nevada and Arizona and oil is at an all time high. We are witnessing an economic perfect storm which will lead to a recession. The Federal Reserve can call it slow growth but the average American is worse off now than they were in 2000 and hopefully that fact will lead to the decimating of the Republican party in 2008 and a return to sane fiscal policy.

The House of Cards Continues To Fall

The stock market continues its downward slide.

When I read the business section I keep picturing a house oif cards that is slowly falling. That is what the economy seems like. The bad news just keeps coming.

The Dow Jones industrial average lost 218 points, falling below 13,000 for only the second time since the summer. The S&P 500 index lost nearly 1.8 percent. The Nasdaq composite declined almost 1.7 percent.

Small cap stocks were hit harder with the Russell 2000 falling 2.5 percent.

Treasury prices rose, lowering the corresponding yields. Oil prices rose. Gold prices declined.

Goldman Sachs downgraded Citigroup to "sell" from "neutral" Monday and said the bank will likely have to take $15 billion in writedowns over the next two quarters due to bets on risky debt. Citigroup shares fell 5.9 percent.

Goldman also cut its price target on Merrill Lynch, Morgan Stanley and others in the sector.

The comments sent the overall market lower, as investors were reminded that the breadth of the credit market fallout is not really known and could be a lot worse than has been expected.

This is the result of a lack of regulation. It is the hallmark of the Bush administration. They believe that industry will police itself. That is what gave us the ponzi scheme called the subprime crisis and now the lack of oversight will lead to recession.