Will dropping interest rates help the US economy?

The US Fed Reserve Board is signalling that it will be dropping rates even further. Some commentators are inclined to see these steps as good news....but is it? The rationale for raising rates is:
1. Increase liquidity in the banking system by creating the means of financial institutions to create more financial resources, which allows them to cover any short term incapacity to meet obligations as they fall due
2. Increase the financial resources of banks so they can lend more money to the private sector. In the context of a growing economy that has to be good. In the context of a bad economy, who wants to borrow money? No one wants to buy a house when property prices are falling. And with interest rates still low, clearly there is still a lot of pain to be placed on borrowers before we see a low in property markets.

The implication is then that the Fed moves will do very little except delay a few banking failures. But I suspect the Fed knows that. Politicians and Fed chairnman dont do things because they are logical, they do them because they are the actions expected by the market. They are delivering what perceptions demands of them. They wait for the market to direct them. Cries for lower interest rates - give them what they want. In 2 years when we have run away inflation. Stop inflation, then they apply higher rates.

Really there is no escaping the impact of inflation. If you take a certain set of actions you have to live with the consequences. If you expand the money supply more than the productive capacity of the economy over a sustained period, you will create asset inflation. When asset prices are too high, you undermine the capacity of people to borrow, you deflate that debt-asset pyramid, and the extent to which you do is the extent to which you dont see inflation. But to the extent that people are able to meet their debt servicing obligations, that is the extent to which other people will be hurt by the rising prices for living expenses.