The Queen propped her up against a tree, and said kindly, `You may rest a little now.’

Alice looked round her in great surprise. `Why, I do believe we’ve been under this tree the whole time! Everything’s just as it was!’

`Of course it is,’ said the Queen, `what would you have it?’

`Well, in our country,’ said Alice, still panting a little, `you’d generally get to somewhere else — if you ran very fast for a long time, as we’ve been doing.’

`A slow sort of country!’ said the Queen. `Now, here, you see, it takes all the running you can do, to keep in the same place.

If you want to get somewhere else, you must run at least twice as fast as that!’

I’m still trying to figure out how much helpful the Bernanke cut was. The main reason for this cut was to fix two main problems:

3-month Libor was hanging around 5.35% for a while and then, suddenly, started to move up at Aug 9 and jumped as high as 5.72% at Sept 5th (financial equivalent of cats sleeping with dogs). It crashed down to 5.23% after rate cut. So it took 50 bps cut to move rates 12 bps below the pre-panic level. It looks like nobody was impressed.

The commercial paper market was in the state of unprecedented collapse since mid-August.  After the cut the collapse stopped but there is no visible movement in the direction of the recovery yet. Nobody was impressed.

It seems that Bernanke will have to cut rates on regular basis just to keep things like they are, not to make them better. This was well described in the book “Through the Looking-Glass” 🙂