Economics Hurt My Head

Disclaimer, I do not claim to be an economist. I'm not even all that good at math. But, I must say, that the Fed cutting the interest rate by 3/4% puzzles me. Now, I understand international markets were tanking and our's wasn't looking any better. I understand many banks have written down huge losses on bad loans and the housing market (new starts mostly) is overall WAY down. There is a "credit crunch" I've heard it called, both at the BIG level, banks, etc, and the smaller level, consumers.

So, I understand some of the reasons the Fed did this. However, didn't ultra-low interest rates help get us into this mess? Not just rates alone, plenty of bad judgement, unscrupulous lending, and consumer stupidity have helped, but the rates were low low low for years with little oversight. Now, its time to spend spend spend our way out of a crisis that frankly we got into by spending too much. I guess I don't see how the end result, getting consumers to spend themselves even deeper into debt, is the solution.

Oh, trust me, I know how basic (VERY basic) macroeconomics works. Consumers must spend for companies to make money, etc. etc. But, there must come a point when we've overspent. Right? Our country already borrows billions upon billions from foreign countries (including China, a BIG lender) because the country overspends. We consumers borrow billions upon billions on our credit cards, car payments, house payments, etc. That's fine, as long as we're making the payments. We aren't as consumers. Too many people are overextended.

Here's the problem, I have no idea what to do about this. Usually, I offer a few suggestions, but here, I don't know at all. And what scares me is, I don't think the really smart people do either. That's not a recipe for success. Hopefully I'm not coming across as alarmist or gloom and doom. I don't feel that way (completely). But I do feel our country is in deep economic trouble and that no one in charge wants to admit how big the issue really is.