America is Broken and the World Economy will suffer. The Federal Reserve in their infinite wisdom (these guys are almost as smart as the monoline insurance* companies) dropped the cash rate 75bps on Black Tuesday (22nd Jan) and that didn't even stop the rot. Now that they have telegraphed another 50bps cut, we're going to see what happens when the cash rate is less than inflation. There's no incentive to save money because money in the bank is devaluing quicker than any yield you're getting on it. So the Fed is betting that once again America will be able to spend their way out of trouble. This sounds good, but when people are pessimistic from years of war (I can't even remember a time before Bush War Snr and Bush War Jnr) and falling asset prices (Houses, Shares and Money) then they're not going to be in a spending mood. This is going to sting for a while. The fed should have done what we all did on Tuesday, sucked it up. You can't keep shielding people from being hurt or they'll never learn Bernanke you Goose.
*these guys are insurance only in the sense that they're happy to receive your premium payments while the sun is shining but as soon as the storm clouds gather they are downgraded and aren't good for their AAA rating.