Why the sudden hoohaa...?

What that was expected to be the worst Friday turn out to be a biggest u-turn we’ve seen for a couple of years …. First why would a half a percent cut in the discount rate make such a big difference? No doubt this seems to be the best move by the Feds to turn things around but will this solve the underlying problem that causes the credit crunch in the first place? I don’t think it’s that straight forward…

First, the reduction by 50 points on the discount rate is some what mediocre in comparison to the situation that we’re facing right now… at least what the mortgage market is facing… second, the subprime issue is still very much in the midst of the problem… what is happening to the sudden u-turn in the equity market on Friday are merely the perception by the people that liquidity issue will be reduced from now onwards….

Seriously the Fed have got to do more than that to ensure the liquidity problem is eased… but in general, it’s still a good move by the Fed to stem the continuous drop or what I think could have been a historical Black Friday of 2007 should Bernanke had not made this decision.

And don't forget about the effect of this on inflation... it's a concern for sure...

Word of caution, the dust is not clear yet…this does not solve the problem right away, sorry no magic.