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The credit market, for the most part, is dysfunctional, as the real estate woes in the U.S. get absorbed into the financial system. That said, the U.S. economy did quite nicely in the third quarter, what with job growth, unemployment at a six-year low, and exports booming. Everything now seems to rest with the all-important consumers, who make up almost 70% of the U.S. economy. Confidence is down, and spending is slowing – but, panic hasn’t set in just yet.

Bernanke seems to be leaning in the direction of interest rate cuts as being the savior for the ever-increasing risk aversion in the credit markets globally – not just in the U.S. But, he could be falling into a trap – that being one of needing to keep up with the cuts to assuage the fears of the hoi polloi, who expect more and more of the same, once they realize that the last cut just gave rise to a temporary lift, and the economic slump remained intact. The question is, should he go with marginal injections of liquidity, or go at it aggressively. I guess it all boils down to how far away he sees a global recession in the offing.

This report is brought to you by www.forexmentor.com with courtesy to Barrie McKenna, The Globe and Mail ROB, Dec. 10/07.

–Peter
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