Just as the U.S. military establishment is always fighting the last war and unprepared for the current one, the Federal Reserve is always fighting yesterday’s economic woes and thus creating new ones of its own.

Ever since Jimmy Carter and his malaise–i.e., complete incompetence in everything governance–the Fed has been fighting inflation.  It fought inflation the last time when the problem was a bubble in the emerging Internet economy; for the past two years it’s been again fighting inflation when the real problem was to sustain the affordability of money.  When it raised interest rates and priced people out of their mortgages–duh–guess what happened?

You’ve seen the results of it for the past two days in the worldwide stock markets.  Crash, boom, bang.

The answer is simple, stupid.  Just lower the rates that you should never have raised in the first place.  A Fed rate of 2.5 to 3 percent would work just fine, but we won’t see it again until 10 million more people are suddenly out of work.

Will the powers ever learn?