Anyone remember Harry Nilsson's novelty hit "Coconut" from about 1973? Simple, calypso-y song with only one chord. The lyrics were a bit odd -- a man and his sister buy a lime and a coconut, the sister puts the lime in the coconut, "drink them both together", feels ill and calls the doctor in the middle of the night. His advice "put de lime in de coconut, drink them both together, put the lime in the coconut, then you feel better". So the cause of the belly-ache and the cure seem to be one and the same.
That's fine for a novelty song, but can it really be the case for the US economy? Nobody can seriously deny that the root of the severe malaise gripping the US economy is the excessively easy monetary policy -- low rates, rapid money supply and lending growth -- encouraged by the Greenspan Fed. Yet today, by cutting the funds target by 75 bp, Fed Chairman Bernanke seems to be signalling his belief that the economy can be cured by administering more of what made it sick in the first place.
Hey Ben, to quote Nilsson again, "if you call me in de morning I'll tell you what to do".
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