Fed cuts rates to 1.5% - why did they wait until now?

If a Fed rate cut is actually going to help, why did they wait until now to do it? Why didn't they cut rates immediately, about 2 weeks ago when the current crisis started?

There are two possible answers. Either there is no real "crisis" so they knew they didn't really have to act, or, the current Fed rate is meaningless because the de facto rate is already far lower.

Some people would choose the former, saying that the meltdown was a fraudulent money grab by Wall Street. I opt for the latter. Let's admit it: there is a crisis. Wall Street didn't coordinate the meltdown with the rest of the world's shareholders and businesses. Conspiracy theorists are giving these "geniuses" way too much credit. The truth is they fucked up, and left a mess for everyone else.

But this rate cute is a joke. It's completely for show, particularly the simultaneous action with other countries. Now, those countries truly didn't think they'd have to cut rates just two weeks ago, so their cuts may mean something to their economies. But in the U.S., if a rate cut was part of the answer, it would (and should) have been done weeks ago. Ergo: it was. The real rate is probably well under 1% by now.

The Fed has a particular language for this, one they used after the 1987 crash, before the Y2K turnover, and immediately post-9/11. Well, I should say Alan Greenspan has a particular language, for he was at the helm during those times. "The Fed stands ready to provide all necessary liquidity" he said in 1987, and similarly during the other two events. What he meant was that rates will go as low as the market naturally takes them, as low as they have to be with money freely flowing. The goal of higher fed funds rate is to slow the flow of money and/or the growth of the money supply, and keep the economy from overheating. So to keep the flow constant in difficult times, that rate has to fall. The Fed, during times like these, allows the rate to drift as low as it needs. Think about it: if the higher (2.0% being "higher") rate was getting in the way when commercial paper froze up, don't you think they would have lowered the rate immediately?

It's almost impossible to see how the Fed could really keep the rate constant given the massive amounts of money that have been put into the system recently. It would have taken a lot of work, and made things worse. Hence my contention that the rate is meaningless right now.

Europe's moves are a lot more significant at this time. Their rates were higher to start with and they've put far less money into the system. They also can argue that they were trying to avoid having to cut rates two weeks ago.

But for the United States, if a rate cut is a good thing, why didn't we do it two weeks ago? My answer: this is a cosmetic move. It changes nothing, and will only help if it fools people into thinking it's meaningful. And right now no one's going to be fooled. We're way beyond rate cuts in this mess.