I don't think the Fed is going to cut rates soon - to be doing so would be a tacit admission by the world's leading decision-making body that the economic growth of the past few years has been fuelled solely by debt-fuelled consumption. But this is not really the case - true, a number of companies (mostly those controlled by Private Equity) and a number of market participants are highly leveraged, but this is not really true for a lot of the companies around the world.
I think what's happening in the markets should be allowed to happen, albeit under a watchful eye. There is a subtle difference between a liquidity crunch in the economy as a whole and that in the markets - the latter is merely a redistribution of liquidity or a 're-pricing of risk', which has clear short-run impact on those with high volumes of debt.
Once the mania in the markets settles down, and debt is available to those who can afford it, the economy will continue as normal (until it reaches its natural trough).

Udaiveer Anand, London,

Reality strikes home. Listen to the voice of small business - they knew two months ago that things were turning down. The banks ignore this vital sector. Stupid people in Financial Services playing with paper money and fiddling large bonuses on the way. Wake up everybody and smell the 'pong', not the coffee ! Middle income people will 'as usual' pick up the bill. Noone else has any real money.

John Fisher, West Linton, Scotland

And these people call themselves economists - what good would an interest rate cut do when there has been high-risk lending on overvalued assets? A rate cut won't inject confidence into the markets because we all know that there is still a lot to come out in the wash of the credit crunch. Up to now, these asset-backed securities have been rated incorrectly (as AAA or close) by the market and investors piled in. Now the market has finally shown many of these assets to be the junk that they really are. That's the free market: if the central bank lectures all other sectors of the economy about the terrible inefficiencies caused by govt intervention into markets, then why is the hedge fund sector the one and only exception to their mantra?

An interest rate cut would be pointless and in fact dangerous as inflationary pressures (e.g. food) are still strong. These economists are like those in 1929 who predicted it would all be over by Christmas if only the market got some "organised support"

MB, Edinburgh,

Although this crisis did start in the U.S. Sub prime market, the real factor in all the extra leverage globaly and the reason why we are seeing the exceptional volatility is that Japanese interest rates have been too low for too long. The carry trade has permeated every investment sphere, from hedge funds to japanese house wifes, even turkish mortgages to take overs and leveraged stock buying. The imbalance has been caused by the weakening yen and the massive borrowing of yen. Remember the BOJ flooded japan with yen for the last 7 years. When there is too much of something around it is only naural people will sell it short. The fact that the BOJ has not normalised rates over the last years is the reason why the NZD and AUD dollars rose to generational highs, and the return to risk aversion over the last weeks is why they have fallen 26% and 22% repectively. As long as markets are allowed to adjust freely the crisis will pass quicker than people think.

S Harrison, London, UK

Ridiculous house price inflation in the UK needs to be curbed if the economy is truly to be boosted.

I am a mortgage free homeowner and my property has risen in value by around 75 per cent in just under 6 yeras. However it is ludicrous to say I am better off by that rise. If I "sold down" by moving to a cheaper housing area or into a smaller home I could cash in some of my chips but if I wished to relocate to a larger property or similarly priced area I would be spending my 75 per cent "profit" on my new home.

First time buyers, particularly in the South, are being priced out of the market. A correction is needed not least because where a labour force is needed there have to be affordable homes to house that pool of labour. The alternative is an effective economic wasteland, populated by people like me, preparing for retirement or already retired, living in overpriced properties which the younger, economically active, population cannot afford.

Geoff Toates, Welwyn Garden City, Herts

Let the hedge funds go bankrupt - and JpMorgan, Goldman Sachs, buy to let investors, etc.Property is double what it should be in the UK and this effectively nearly halves everyones standard of living.

The central banks screwed up by not targeting property inflation so it got out of control.

Property is not an alternative for your pension.

JP, london, UK

I understand where you're coming from Matt but I think a funds rate cut is needed, and is almost certain to occur if projections by companies like Wal-Mart continue to sour. Sure, President Bush's policy of tax cuts and low interest rates has led American's to turn into a massively consumerist society (and into one with a great amount of debt), but right now the issue in my view is to somehow stem the tide of A) the possibility of unending market volatility and B) a general economic recession promulgated by a lackluster consumer base.

I for one am not optimistic that the lowered discount rate will quell investor fears, longer term, that institutions like Countrywide, for example, will avoid insolvency. Instead, increased home purchases are what will allay those fears in the end in my view. So, rates must be cut to shore up some confidence that the base of the American economy, the consumer, will not stay away. But this, of course, will raise the inflation question...

Alexander-Filip S., Beograd, SRB

The role of central banks is to provide conditions for real businesses to thrive, not to rescue the charlatans of hedge funds and private equity firms - even if they are Gordon Brown's heroes. That means controlling inflation. The global money supply is still running away like a train and these same companies, along with banks offering mortgages (still) on foolish terms and zero interest on credit cards, are doing their very best to stoke the inflationary fires.
The sooner the US and UK realise that financial innovation is a Ponzi schem by another name and encourage firms that produce real wealth the better.
These 'snake-oil' salesman deserve all they get.

eddie reader, birmingham, uk

The rise in asset values such as houses,art and shares has in part been triggered by an Asian desire to maintain export momentum.By holding down currency values Asia has allowed us to inflate our asset values,borrow against these inflated values and spend in excess.As this unravels there will eventually be a shift of wealth from the developed to the underdeveloped economies.Our perception of what our hourly wages should be and the ammount of comforts we can afford will have to change.It seems as if everyone is playing a game of dare by subsidising the US consumer and accepting US denominated iou,s in exchange.When the music stops asset values will crumble and peversly the dollar will rise.All this should happen just as food prices race ahead leaving people wondering how the valuation of a semi in Pinner could reach hearty laugh levels when the quality of life had reached rock bottom.The quantum leap in asset prices has not been matched by anything other than greed,GDP has not kept pace

Stephen F, Pinner, Mddx. UK

The central banks have shown themselves to be liars. Fight against inflation when everything is calm. a few days of market turmoil and Ben is donning his flying suit to drop cash from above! (see Bernake's famous quote)

The time is now to protect yourself from massive falls starting tomorrow. Buy/hold gold, mega caps and mostly cash.

I may sound dramatic but this is the start of the global recession. Good luck

jonathan , marlow,

I tend to agree with Matt. The BoE cut by 25 basis points to 4.5% in August 2005 was unnecessary and led us to the present boom in house prices and inflationary pressures in the UK economy.

CoogarUK, Dorchester,

Politicians, economists and central bankers have got us here so why do they now have a problem?

I suggest central bankers all take a holidayand let markets decide. If people want or need to borrow money I'm willing to lend. But I need a real net rate of interest compared wth monetary inflation for a few years to catch up.

DM, Eastbourne, u

I have worked in Capital Markets for 25 years and can vouch that any one with two brain cells to rub together could see this collateralisation of mortgage debt ,combined with Banks falling overthemselves to be involved with these new financial entities, was going to end in disaster ( albeit it continued for 18 months longer than I expected). Central Banks must absolutely NOT cut interest rates unless ( or until) the enderlying economy slows. Any perceived 'bailing out' of these entities would merely leave these bad banking practices unpunished- and dont let anyone think otherwise- thats what this was. Poor lending decisions by institutions who did not care as they were packaging the debt up and selling it to people who had no ability ( or interest) in repricing their asset. We are about to see that the " you cant lose on housing" is a lie. We have a Capital Markets built on a house of cards. Regulators?... isn't this what they are here to stop?

james, london,

Having watched the panic this year I recall moving within the US in 1981. My mortgage rate was 15 3/8%, the builders construction loan was 21% Somehow we all managed. ??
Oh yes. Things are different this time. ????

Jeff Monson, plano, USA

I don't understand why there are people savaging the FED for lowering rates. Yes I agree the recent rates have been on the low side, although one could easily argue this was to fight deflation (which was the last big 'scare') and stop the US economy going the way of Japan's. Now things have got a little messy the FED has decided to loosen the purse strings a bit, I'm sure to help out those who are affected by a global slowdown which is ... everybody.

It must be from a very cynical viewpoint to take (badly disguised) glee from the present situation, and to target the big banks and the bonuses added by their employees. What I feel is a more sobering viewpoint is the hardship being felt by millions of families accross the US who may, or already have, lost their home. Surely they deserve an interest rate cut?

Justin, Alford, UK

having worked in money markets for 30 years before retiring I'm not surprised at a kneejerk "cut interest rates" from economists. soaring money supply leading to inflation is the pressing proble. They theorise and ponticate but I didn't come across many traders with economics backgrounds that succeeded in a market environment. economists are in general the finest example of the old adage "those that can do- those that can't teach"

Roy, hertford,

I see. A number of hedge funds/banks/private equity companies get their fingers burned and world economic policies change....

Glyn Evans, Nottingham, England

Clearly, the root cause of the current mayhem is:

1. Structural fraud between US house builders, the mortgage brokers and the lenders that the regulators conveniently ignored during the American construction boom
2. Wall Street's obsession with coming up with ever more complex financial instruments that create abnormal asset appreciation tied to mythical valuation formulae that perpetuated booming false liquidity in the capital markets

This is a game of musical chairs played out by the fat cats across the world's capital markets. The music is about to stop and panic has set in with everyone scrambling for the remaining prop - cash! As always CASH IS KING backed by gold bullion. The sell-off and write down of paper will come to an end when everyone has settled their debts with real money.

Mike Donnellan, Woodford, UK

''You can't buck the market''.

The markets will not be truly corrected until all errors and bad debts are cleared from the system. Manipulating interest rates in this manner is only a sticking plaster solution. Those who enjoyed the goodtimes are now apparently unwilling to suffer the consequences

Tim, Sherborne, Dorset

My guess is that about 95% of economists have not got a clue about the economy, so why should we pay any attention to them. This crisis has arisen out of goosing the money supply for short term political gain, now we face the unwinding of the massive asset inflation this has caused alongwith all the other malpractices of the finance industry and those that are supposed to regulate them. Unfortunately the ordinary citizen will be the one hurt, the creators of this mess have already banked their bonuses. To advocate a continuation of this madness by dropping interest rates beggars belief and is yet further evidence that most economists are simply ignorant cheerleaders for those that pay them.

ADScott, Bangkok, Thailand

This whole episode hghlights the protectionist role of central banks. If a business in any other arena is suffering because of poor decision making in a risky environment it would never expect the goverment to ride to its rescue with a sack of gold. Let the bonuses drop to zero to start paying for some of the mistakes. Banks will STILL make LOTS of money this year, I bet!

David Tisdale, Nanjing, China

Everyone keeps talking about US subprime..Have we forgotten England that has a huge number of subprime borrowers thanks to Kensington mortgages and its army of brokers!!!!!

Ken Howard, Hong Kong,

People... cutting interest rates is what got us into this situation.
It's very important we do not rely on a strategy of low interest rates to stimulate the economy.

The interest rates after 911 were simply far too low and the result is not a strong economy, but a false sense of wealth through overly mortgaged property. Low interest rates benefit investors, not the average American. Thats why we have/had multiple shows on 'flipping' houses, which ultimately inflated the price of real estate and in turn lowers the average American's standard of living by requiring more than half of their income toward housing costs. Between increased energy and housing costs the dollar simply does not go as far.

Low interest rates ultimately strangle the middle class because they can't stay that way. Either the dollar is worth something or it's not. Low interest rates erode the value of the dollar and America itself. We are saying we are worth less so everyone should buy more.

Matt, Ridgely, MD