The FED has made their moves counting on the consumer *feeling good* enough to keep spending money they don’t have.
The problem is the consumers realized they ran out of money before the FED did. Due to massive inflation, thanks to BB, prices across the board are what, 10% higher than 1 year ago? And that’s not just core inflation anymore.
Think about how much more turnover there is today in consumer “durables” than there was 20 years ago. Our economy is now dependent on people leasing new cars every 2-1/2 years, buying new TVs every 3, and new cell phones and iPods (non-existant 20 years ago) every other year.
Ignorantly, Bernanke thinks it’s a problem of bank liquidity. The real problem is the consumer liquidity.