The worst recession in 25 years?

The Fed's aggressive half a percent rate cut may have kept the boom going on a little longer, but it will only exacerbate the US recession once it finally arrives. Expect a repeat of early-80s gloom.

On September 18 the US Federal Reserve cut its target for the fed funds rate by 50 basis points (0.5 percentage points), from 5.25% to 4.75%. The move surprised many analysts who had been expecting a more modest cut of 25 basis points.

For those versed in the Austrian theory of the business cycle, as developed by Ludwig von Mises and elaborated by Friedrich Hayek, the aggressive Fed 'stimulus' is ominous indeed. Not only will it pave the way for much higher price inflation than Americans have seen in decades, but it will also exacerbate what could be the worst recession in twenty-five years.

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