You may have noticed last week that the US Federal Reserve is dropping interest rates like crazy to try and avert a real recession.
This may or may not be successful, time will tell.
However, one huge effect of this has been the huge fall in the value of the dollar. This has many effects, the most pernicious being encouraging inflation - but this seems to be what Ben Bernanke, Fed Chairman is looking for to fight the depression.
On the other hand, it has led to a strange set of domestic circumstances in the US. The inflation rate (which is as skewed as the UK's, see Ed's comments in the post preceding this) is at 3% and climbing. Interest rates are at 2.25%. This means putting your money in a bank is likely reduce your wealth. For example, HSBC US is offering one of the best rates - 3.05% pa.
Yikes - this means you have to either spend your money or invest it in something that is going to at least hold its value - no easy thing in the current markets. Certainly holding any savings in cash is a bad idea.
The UK is likely to follow the US in this respect in the near future.The Bank of England is likely to cut rates and inflation is rising - so although we probably won't go into negative territory like the US things will get close. This will make for some risky investment decisions having to be taken by investors - including fund managers who will be forced to reduce their cash pools to generate acceptable returns.
The pound in your pocket is heavily affected by this - perhaps we should all convert our spare cash to Euro's or Renminbi to maintain its value....at least these are safer havens in these interesting times!