It is good to see the Fed taking the bull by the horns...or should that be the bear by something?

They have cut interest rates to a range of between zero and 0.25% today. This cut recognises the magnitude of the problems that the US and the global economy is in.

As a student of the Great Depression Ben Bernanke has taken proactive steps to try and curb the US economic downwards spiral.

This cut will not be enough to get the economy out of the hole but it will go some way to helping in the long run. Don't expect instant results from this cut. The banks, in their current state, will take a while to pass on the cut to consumers and to start to lend again to business.

Expect 2009 to be a long and painful year, but for some, particularly those on fixed incomes, falling prices and lower interest rate cuts could come as a pleasant boost.

It seems highly likely that the US Federal Reserve will cut interest rates in half today to 0.5%.

As base rates approach zero the Fed is rapidly running out of conventional measures to stimulate the economy. Therefore expect to see some forms of quantitative easing and large fiscal stimuli throughout 2009.

For more information on quantitative easing

Managing the US economy is going to be extremely difficult over the coming six months. Without a well functioning financial system, few of the conventional measures are helping to get the economy going again.

The Fed and the US Treasury will have to work together first and foremost in getting to the route of the US economic downturn. Whether this be housing, the banking and financial system, consumer confidence etc etc. Large scale, throw your money at it type solutions are not going to work well...they will be costly and wasteful.

If the broken system can be fixed and the economy taught to stand on its own two feet, then the seeds will be sewn for economic recovery.

Its going to be a long, hard and complicated journey.