Mortgage rates fell a quarter-percent in the nanosecond after the release of July payroll data Friday, and 30-year low-fee deals are 5.75 percent for the first time since last winter.

The employment market is deteriorating, July worse than a poor June: only 32,000 new jobs, versus absurdly mistaken forecasts for a 300,000-plus gain.

Casualties and collateral damage are mounting. If the economy really is stalling out, President Bush is in terrible trouble – even though Democratic hopeful John Kerry has no proposal likely to make things any better soon. If the economy really does stall, Jimmy Carter could beat Bush. For that matter, so could Rosalynn.

The Fed will meet on Tuesday; as of Thursday, with every intention of continuing its “March to Neutral,” tacking the next .25 percent onto the Fed funds rate, presently 1.25 percent. As of today, the Fed still has most intentions of doing so, but it also has new and certain knowledge: no matter what it does, it will look stupid.

If it proceeds, a lot of Americans who usually take whatever the Fed dishes out because they think they should will begin to ask, “What–exactly–is wrong with the economy that will be helped by higher interest rates?” If it does not proceed, already shaky financial markets will assume the economy is in worse shape than they fear (don’t hang out below any New York Stock Exchange windows).

If the Fed does proceed, or does not proceed, it will have intruded into the one, single matter into which it is never, ever to intrude: an election. Partisans will assume that any action or none was intended to help one candidate over the other, or did so by unfair accident.

Federal Reserve Chairman Alan Greenspan usually speaks with enough rhetorical confusion to keep himself safely within reach of I-told-you-so. This time, he is exposed. His report to Congress last month was such a definitive – even argumentative and dogmatic – statement of the need to raise the Fed funds rate that he is going to lose a great deal of face and faith if he has to back down. His insistence on “short-lived softness” and “transitory…surge in energy prices” are today the objects of ridicule among the nasties who trade bonds, every one of whom is looking forward to damned-if-he-does, damned-if-he-doesn’t Tuesday.

Public embarrassments aside, what is really going on?

The Fed is desperate to get its rate back above 2 percent, but not so much to prevent future overheating or inflation (the selling points) as to limit financial distortion flowing from free money and excessive leverage. The “March to Neutral” will have negligible impact on the economy.

If the economy really were stalling, we would have seen it in the housing market; appreciation is slowing, but not the rate of sale. Confidence numbers would have faded, and have not; unemployment claims should be rising, but are not. The purchasing managers’ indices are still flying, but both show weakness in hiring intentions – just like Friday’s Labor Department numbers. Business is good.

We are in an anomalous recovery after an anomalous bust. It’s pure hunchwork, but it feels as though well-trained, computer-savvy and motivated Americans have little trouble finding good jobs, but the rest are having a tough time competing in the increasingly frictionless global market for work.

However, about 90 percent of Wall Street is trying to blame terrorism as the cause of any money lost by any investor in anything. Oil prices, stocks, jobs…al Quaeda, all the time. This Google fiasco – expecting $35 billion for a fairy tale – says to me that whatever is wrong with the economy is still closely tied to Wall Street’s preference for huckstering over the realities of making a living: preparation and diligent work.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at


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