Backwards Economic Policy

Enough with these namby-pamby rate cuts. It's time for Ben Bernanke to be a real man and do what the economy needs: raise rates! He's cut rates time after time and none of them have yet had an effect on the economy.

The core problem of this economic downturn is that there's not enough credit supply. Rate cuts increase credit demand, but don't help supply. Banks don't lend (and provide credit supply) for two reasons:
1) They don't have cash to lend
2) They don't think they'll get their lent cash back

Raising interest rates will address both of these problems:
1) Higher rates will motivate more investors to put money in deposits. Tax cuts on interest on bank deposits for this year will further motivate investors to put cash in banks.
2) Higher rates mean banks get more money back for lending. When rates are low, they get less money back for lending, reducing motivation to lend. Raise the potential payback for lending, and you raise motivation to lend.

Conversely, cutting rates makes both problems in credit supply worse.

Bernanke is cutting rates when he should be raising them. We're still in trouble after multiple rate cuts, including the one this weekend. And the government should be cutting taxes on deposits, not sending blanket rebates. Higher rates will hurt some people and businesses, but it's better to hurt some for the short term than to hurt everyone for the long term by pushing us all into stagflation.

Good luck everybody. Bernanke's driving backwards.