Last month, readers of this column, got a preview of what the general media is just now starting to report regarding the real causes underlying the problems affecting the credit markets.

And, now, we are also hearing about what the Federal Reserve has done recently to try to fix things. It’s OK to believe (or hope) that the Fed’s actions can help, but do not conclude that the situation is fixed. It is not.

In fact, while our Ship of State must avoid the iceberg we previewed last month, the unfortunate effect of the latest well-intended Fed actions is to release ‘mines’ that are now afloat in the Seas of World Trade, the Gulf of NAFTA, etc.

What do we know so far?

We know: The housing market is down, both transaction volume and unit selling prices. The mortgage market has been squeezed dry of the mother’s milk that nourished our economy. There has been a steep increase in foreclosure filings; there has also been a dramatic increase in personal bankruptcy filings. And, we pointed you to the credit problem of ‘packaged credit assets.

A general shaking out has been under way. Efforts taken to date are intended to ‘slow’ effects and include infusing billions of dollars of liquidity into the markets, interest rate reductions, etc. However, the effects of these actions are much like mines that, should they explode, will expand and then accelerate unintended consequences.

So, what was intended? And, what will actually follow?

The intended upside: The Fed took the interest rate reduction action with the hope that, in turn, banks will lower bank interest rates, thus making new mortgage loans and mortgage refinancing somewhat more affordable.

What will follow?

New mortgage loans for well-qualified credit buyers with at least 20 percent down will be available. Same for owners with ARM mortgages, strong credit and at least 28 percent equity. (Fannie and Freddie can help other viable buyers, but if politicians tinker with programs — this is an early election season — they will make matters worse in the long run with increased government debt.(

Other well-qualified credit buyers with less money invested in a downpayment, will pay dearly with much higher rates. Combined with required PMI, those individuals will be at much higher financial demand levels. They will also be subject to extraordinary risk if personal employment changes.

Two additional hurdles here for all parties in a real estate transaction will be local market price trends, and how the appraisal industry reports specific house values.

Another intended upside: With the fall upon us, the Fed understands that consumer confidence needs building because Santa’s shopping season is the critical quarter for the crucial retail sector of the American economy.

What will follow? On the one hand, the Fed moves are understandable. On the other, we should expect that our U.S. dollar will continue to fall. Expect a new low. Then, expect newer lows. In fact, the real question is: How low will our U.S. dollar go? No one really knows. Many will hazard an estimate, or a guess. But, the reality is that “mine” is afloat in the water.

The more important question is Do Americans understand what is happening to our U.S. dollar and what is at stake? Will each of us do what we thoughtfully realize must be done, and, in our quest for stability and a strengthened dollar, avoid being manipulated by soothsayers, et al?

Here’s a quick tip: A quick effective tactical action everyone can take immediately to better manage his/her dollars: Stop unnecessary spending — stop cold turkey! If at first you think any given transaction is necessary, think again. The reality is that a weakened dollar buys less of whatever each of us spends our dollars for.

Some Americans like to say there is ‘too much month left after their paycheck is gone.’ Others say ‘they don’t get paid enough,’ or something similar. That’s why it is critical for your financial survival to understand the difference between ‘needs’ and ‘wants’ and accept the reality that each of us makes a choice each time we spend money. (See note below.)

A weak dollar means that every American pays more for each imported item we buy. Yes, that includes gasoline, because of imported oil; but, it also includes commodities, and even those toys that are being recalled due to high levels of lead. The bottom line is a weak dollar equals weak purchasing power. And, the American dollar is getting weaker and weaker, which robs each of us of the purchasing power we rightly earned through our investment of time, labor and capital.

Yes, there is a housing crisis. Yes, financial markets are under severe stress. Yes, oil import prices are up, and gasoline prices will follow. Yes, the soothsayers, will divert attention, manipulate and mislead. And, yes, each of us can weather the monetary storm by taking action now to rein in personal spending and increase savings. And, we can help our country and each other weather the storm by insisting that government at all levels do exactly the same.

NOTE: For a free tip sheet, complements of this publication, on the difference between hard money (coins) and soft money (paper); our unique way of thinking about money denominations and how it helps individuals to better manage their spending habits and decisions, e-mail me:Rich@Olivastro.net.