Bad Practice

In olden days when some one got injured, or when some one had blood from infection or /injury, the physician would let the bad blood out. The person with wound would feel weak after the fact that he/she lost a lot of blood, but the person would not have venom/ infection in his/her body.

In such a scenario if some doctor were to just stop the flow of bad blood and allowed to keep the blood in the body, what should one say about Doctor’s practice? Purely bad practice. The motive for such bad practice could be anything. A short term gain to make that person fight a war ( may be at a cost of sacrificing injured arm/leg or the person) or it could be plain old gullibility/stupidity.

That’s exactly what FED is doing / has done so far. The FED has reduced interest rate after the credit market crunch or as some call it sub prime meltdown. As a Doctor, Fed did not let the bad blood flow away. The FED has just put the bandages on the wound and readied the (tired/wounded) US economy to continue on growth path. Eventhough, everything in the real world is arguing FED to do opposite.

1. inflation is high
Even though the indicators don’t/may not show inflation
I’m paying more for Milk, Gas, Commute, Food, Restaurant and the most important housing.
The only place I’m paying less is for technology and services (not the most necessity of life).
2. US economy is not doing well compared to China, India, Europe (some one would say dragging)
3. US trade deficit is rising
4. US Budget deficit is at highest
5. US is in the middle of WAR


So is it not a Bad practice according to conventional wisdom.

One possible caveat
It is possible that FED has more data and better understanding of the problem. By elongating the problem FED it suffocating the problem or in a way applying new medicin. And all the other symptoms I mentioned (1 thro’ 5) are not life threatening while the Sub prime symptom is life threatening.