We have good news from my Uncle Sam, America. Time lag had been working for 1 month, when LA Times sent me good news that Interest rate cutting by FED has show his magic. I think worldwide economic will be impacted and reaction to better condition. LA Times told on the report that credit problem return go nice.
What does it mean? When fall into Bad Credit, Number of dollar to payback their credit has arisen, now, people have ability to payback because of lower interest rate.

Understanding people must know that correlation between interest and ability to payback their credit or loan. Lower interest rate, makes people turn to invest their money or create a job. Lower interest rate also makes dollar to payback will lower than before.

When American economic goes better, oil price will meet new equilibrium, lower than before and my prediction, oil price will turn down and down, maybe stop and stabile around $ 90-100 USD per barrel.
While Uncle Sam Economic goes healthy, banks and loan company treasure and stock will be appreciated on stock market. Dollar is also appreciated in exchange market.
New equilibrium doesn’t mean that the price and dollar in exchange market will meet to previous equilibrium. New equilibrium will lower than the highest but upper than before equilibrium.
I do sure; oil price will turn significantly in recent days. Let us see our prediction.

I have post in earlier article, Time lag and Intervention talked about how long time lag is needed in order to make intervention (cut interest rate) work.

As we see, time lag maybe runs in short time or long run; while time lag work, what the impact or reaction when time lag is working. Reuters to day, send us the good report (actually bad report to American employee) because the impact from interest rate intervention by FED doesn’t work till now.

According to Reuters, The Labor Department on Friday said non-farm employment fell by 80,000 jobs in March, the biggest decline in five years. Financial markets saw the drop as reinforcing the need for further Federal Reserve interest rate cuts.

This is just the beginning; FED expectation on their interest rate cut doesn’t work well. Time lag make unemployment rise. The report is bad news but it’s real.

Economic Theory teach as that lower interest rate makes investment arise, more job available and more employees will be hired, but it doesn’t. The unemployment rate jumped to 5.1 percent from 4.8 percent, the highest since September 2005. Another word, There are 80.000 employees became unemployment now.

FED confess this problems, try to handle the phenomena and launch a new statement, perhaps that their intervention on interest rate will runs well in near soon. Expectation goes wrong. Increasing in total unemployment on March makes White House unhappy based on the Job Report from Labor Department.

By the way, Cutting interest rate, could make bad reaction or good reaction in time lag.

Case on Interest Rate and Regulation Intervention on American Economic

Time lag, in economic theory, Time lag means time to wait the intervention works. Simple example is drug (medicine). Takes time from the medicine reaction and fight the ill. Nobody knows how long time the intervention was taken to realize or to heal the economic problem. So, all of us are still waiting.
Yesterday, I got good news from Reuters. Reuters in report said that American economic start to reborn by some good indicators. One of the best indicators is Credit Score for the highest lenders company in America is appreciated
The problem is in time lag period, we see bad reaction or good reaction in short run, I mean, there are two payouts (results) time lag made.

For more understand my opinion, I will put real economic condition, America is down because of recession and some intervention by the authorized bureaus.
Bad Reaction in time lag
We have seen that FED has cut 0.25 percent interest rate and allowed millions dollar for credit healing. In their analysis, they know exactly that in time lag period (short run), there are bad things will be happened. In real example when time lag is working, Dollar declined against major currencies more and more, some credit lenders also fall in credit score, because all people have the same psychology, waiting and do nothing in time lag period.
In time lag period, Investors, Brokers and Speculators take profit. They care about the time lag, but they made conditions become worst. In their mind, bad and good things are profit taking. If America is in time lag (recession), they gain profit taking with selling dollar.

Time lag, in most cases (like the impact of medicine) economic will lower condition and take some time to build its power. Invisible hand makes no one know when time medicine will work. The authorities just know some bad reaction by commonly past cases.
Good Reaction in Time Lag
In most case, there are minor good reactions by the intervention, only they who take some advantages in time lag period as written at previous paragraph. Broker, speculators, brokers and some sectors who take profit while Dollar is weak.

First at all, I would like to make our sense that we are outstanding people so we (like I) must keep in our mind that American Economic is central of world economic, a little case (all cases) is happened in America, the impact will broke the world economic. Their economic is more power than us. So we have to look careful, analysis the impact of all events (political and economic are the example) there in America.

Recent months, American falls down. The impact is happened everywhere, anywhere, any persons and all states. USD Dollar fall down in record against Yen, Pound Sterling, Euro, and others major countries. The impact also happened to all price products, especially oil price, gold, stocks, bonds, treasury bonds.
When Yen won has been winning against USD Dollar, in short run, Japan gained some advantages but in long run, Japan hope Dollar win against Yen because if the case happen too long, Japan Economic will fall down also. The same case was happened in Europeans, and All countries in Asia.

Good respond came from FED with FED interest rate intervention and strategies decision, perhaps the new equilibrium come.
Yeah, we have to say that American is still become leader and central of Global Economic so far. Maybe China will runs and win against America, the indications are showed with high economic growth in China.

Thank You Mr. Fed for your intervention on market failure; Cut the interest and allowed home loans
Adam Smith said No Intervention Please from Government! Market will be equilibrium again by Invisible Hand. Hello Mr. Smith, Who is the Mr. Invisible Hand? One I ask to Adam Smith, George Soros doesn’t believe to Invisible Hand. He doesn’t believe to free fight enterprise, free competition. He doesn’t believe that the miracle of invisible hand come from France Language.
Who is Mr. Invisible Hand? Market, demand and supply? No, John Maynard Keynes didn’t believe that. So who is the Mr. Invisible Hand? Christianity Thought said that business is evil, so businessmen must be cleaned by charity.
When market gone failure in 1930 an, Invisible hand didn’t come. Invisible hand is not real. So who replace Mr. Invisible Hand? Government? Yes Government is Mr. Invisible Hand. He came in the big recession.
Now, he came back, Government (Central Bank of course) back to clear all market failure. Fed has done it in near. When American Economy gone crazy, world economy also gone failure. American economy is the leader, and we (others economy is only follow) are behind. Fed back again after in January fed cut the interest rate. Fed backs again to stabilize American economy so we can breathe again. Through What Fed stabilizes American economy?
Let us see the failure first so we can analysis and suggest what is fed tool?
World turn to recession, high unemployment, and business doesn’t work well; flying oil price, stock declined significantly, Politic problem in Tokyo, Recession in property credit in United States and many more problems caused market failure.
In America, The most problem is Business Property; specifically failure in Home loans crash. Fed come likes Jesus and allowed millions dollar to help. Stabilize, and refresh American problem.
More detail about those cases, market failure, read related post below.
An additional opinion, Market Failure in American is also caused by Mr. Bush because he make his American economy as second target, otherwise Iraq is his first target so my predict the next American president comes from Republicans.
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FED cuts interest again on NYtimes.com
The reduction of the benchmark interest rate to 2.25 percent was less than investors had been hoping for, though it was one of the deepest in Fed history
The Fed cut the fed funds rate by 3/4 point to 2.25%. Ron Insana, of Insana Capital Partners, and CNBC’s Erin Burnett, Steve Liesman, Bob Pisani and Rick Santelli share their analysis. Read full article on CNBC news.
Bond gurus Bill Gross, of PIMCO, and Ken Volpert, of Vanguard, react to the Fed’s decision to cut a key rate by 3/4 point.
Fed cuts key interest rate on Los Angeles Times.com
By Peter G. Gosselin
In a forceful move to contain the growing credit crisis, the central bank slashes its benchmark interest rate by three-quarters of a percentage point to 2.25%.
Rate cut aims to push fearful investors to take risks
By Tom Petruno and David Colker
The Fed’s intent is to coax money from low-yielding accounts back into stocks.
WASHINGTON/NEW YORK (Reuters) – The Federal Reserve slashed U.S. interest rates on Tuesday, boosting Wall Street, which was already higher on stronger-than-expected investment bank earnings. on reuters.com