Why did Bernanke/Fed Reserve make such a bold cut in interest rates???

Question

The Fed was between a rock and hard place. To follow sound economic principles, staying pat was the thing to do; inflationary pressures are increasing. Just look at the metals and currency markets; they know what's going on. Bottom line, Bernanke had a choice between inflation and deflation, and his choice was made. I once read (don't have the link, sorry) that waaay before Bernanke became Fed Chairman, he was asked what he would do if faced between inflation and deflation. His response was to fly around major US cities in a helicoptor and dump greenbacks everywhere, thus earning him the knickname "Helicoptor". Fire up those choppers, baby, Benny Bernanke has lots of bags of US$'s to throw around!!!

Answer 1

The fed thinks there is a high probability we are headed for a recession, which is deflationary, so thought it was a reasonable gamble. If the economy is slowing the demand for loans will decrease. Dropping the rate only creates extra money , that is inflationary, if there is a unchanged demand for loans.

Answer 2

A couple theries. The Feds in general have been in a twitter lately because of the news about home sales. As you may know, new home sales has dropped quite a bit, also the number of reposessions continues to rise. (so many people foolishly took advantage of interest only loans) The market often takes its own ques from the health of home sales. Lowering interest rates may have been the Fed's attempt to keep the bottom from completely falling out.
I LOVED THE PIRATE ANSWER, IT MADE ME LAUGH

Also, if you want to be a little snyde.... former Fed Chair Greenspan has made news this week with his new book. Perhaps the new chair wanted some news of his own.

Answer 3

They wanted to stimulate the economy, and by the looks of the short term results so far, they did a pretty good job of it.

Answer 4

Yarr! They were afraid because we be stealing their booty!