Blowin in the wind

There are times when a 0.75% drop in US interest rates would send shockwaves around the globe. But, alas, this is not one of those times.

Instead, you can almost hear the traders and CEOs mumbling petulantly that they thought it might have been 1%.

In reality, Ben Bernanke (Fed chief) might as well have donned some Indian headgear and danced his ass off to try to stem the tide of panic and losses that are gripping the markets.

Adjusting interest rates has about as much effect as blowing into the wind to prevent an oncoming storm.

But the problem is, the US authorities have to be seen to be doing something.

Maybe the loss of Bear Stearns is the bottoming out of this turbulence, maybe this is as low as we go, and if so Mr Bernanke will be slapped on the back for being a genius for his 'brave' move of dropping the rates.

Truth is, it would be just lucky timing if that turned out to be the case. The market, particularly the bond market, had already adjusted itself for the rate decrease before it was even announced. Infact, I daresay there'll be a few more losses out there as it was even money on a 1% drop in the early afternoon.

Further to that, the US Fed had already guaranteed short term cash to those key companies that needed it. Interest rates were dropped to provide liquidity to companies that already had it.

Let's just stop for a breather and consider another thing that happened today. Bear Stearns was purchased for $2 a share. That is 1% of its value a year ago. 1%!!. If you think about it, that's the equivalent of picking up a Ferrari for £800. Or buying a can of coke for 5p. JP Morgan must be still laughing and popping the champagne round about now.

So on we go into Wednesday, dazed, confused, flapping around in the hope that tomorrow is a brighter day, that companies regain their true worth and all our pensions aren't screwed forever.

For now, I would quite like to see Bob Dylan take over the Fed and announce at the podium through an ironic, knowing grin that the times they are a'changin' and the answer to all of this, my friend, is blowin' in the wind...

As I say, such words would make about as much difference as Mr Bernanke's announcement will.