THE CW IS ALWAYS WRONG...:

Rate cut aims to push fearful investors to take risks: The Fed's intent is to coax money from low-yielding accounts back into stocks (Tom Petruno and David Colker, 3/19/08, Los Angeles Times)

With its latest steep interest rate cut, the nation's central bank is trying again to prod skittish investors and lenders out of their protective crouch.

As the housing market has crumbled and stock prices have slumped, many individuals and institutions have been hoarding trillions of dollars in safe, short-term accounts such as money market mutual funds and bank savings certificates.

But the Federal Reserve just made those accounts far less attractive. By cutting its benchmark short-term rate to 2.25% from 3%, the Fed ensured that many cautious savers soon will be earning less than 2% -- the lowest since 2005.

"Two percent is not going to make anyone very happy," said Brian Gendreau, a market strategist at ING Investment Management in New York.

...but never more wrong than when it holds that we save too little.

Posted by Orrin Judd at March 19, 2008 8:06 AM