The U.S. economy is in a recession, and the over-leveraged U.S. consumer won’t be able to ride to the rescue as they have in the past. And I don’t expect the stimulus checks to help much either, as they are way too little too late.

The U.S. Federal Reserve will make sure the global financial markets have sufficient liquidity to operate effectively and will increase the size of its government bond auctions if additional capital is needed, central bank Chairman Ben S. Bernanke said today (Tuesday).

Siegfried & Roy were one of Las Vegas’s most popular acts until 2003, when Roy Horn,  the trainer of big cats, was attacked by a tiger.  He has still not recovered. Siegfried was an illusionist.  We call these people magicians, but the magic they employ is illusion.

The Fed decided to leave out some language that had the markets thinking they had figured out the Fed… But in reality they know nothing more than they did earlier in the day!

The U.S. Federal Reserve reduced the benchmark U.S. lending rate by a quarter point – from 2.25% to 2% – yesterday (Wednesday), and then hinted that it will take a break from one of its most-aggressive rate-cutting campaigns in decades.

Gold sank pre-Fed, falling as low as $862 in London trading, then seesawed through the New York session on Wednesday, before shooting upward in the Globex market after the interest rate announcement and finishing at $876.60, up $5.50. Overnight, gold has fallen off.

If U.S. Federal Reserve policymakers make the expected quarter-point rate cut at the end of their meeting today (Wednesday), the impact will be felt well beyond U.S. borders.

There was very light trading on the Globex in both gold and silver on Monday. A small rally that started shortly after New York opened for business was quietly capped the moment that trading in London ended for day. This is so typical.

“US Treasury Secretary Hank Paulson has proposed the Federal Reserve be given broad powers to regulate the financial industry” says Fred Sheehan.

“He could not have nominated a more incompetent body. The Coast Guard would do a better job.”

“Financial upheaval owes homage to derivatives that shrouded the massive growth in debt and leverage.”

With the banking system going through a period of turmoil, the question of federal regulation will not be going away any time soon. Are market influences enough, or should the government be taking a closer look at how these banks do business.