I am not, by any stretch, a conspiracy person. I think the probability of a conspiracy succeeding is inversely tied to the number of people involved. That makes me especially dubious of government conspiracies. The bottom line for me is this: people are smart, groups are dumb. If you want to understand something just follow the money.
But I am getting a little scared.
You may have heard about the various bailouts and financial manipulations the government is engaged in lately. It has been in the news. There was a $750 billion bailout, followed by another $500+ billion bailout. A number of investment banking firms were bailed out (and, curiously, some were not) while AIG continues to be handed money. Banks are being force fed money and there are more stimulus packages on the way. All done, we are told, to save us from a world economic collapse.
But is it true? This week the Fed lowered the fed funds rate… again. Lowering the rate didn’t do a damn thing a month ago, so why are they trying again? Here’s a better question: Why are they lowering the rate at all? Lowering the fed funds rate effectively lowers the “cost” of money. When do you lower the cost of something? When their is a demand problem. From everything you have read, do we have a demand problem or a supply problem? We are being told that everyone needs money and no one will lend it. So why in the world would you lower the price of money?
Let’s leave that alone for a minute and move on to the credit crunch. As I mentioned previously, the world economic collapse is precipitously close and liquidity is the problem. “No one is lending money.” “Commercial paper has dried up.” “Our financial system is grinding to a halt because cash is being hoarded.” I have not taken the time to actually go out and find these headlines and link to them. I trust this is now such common wisdom you will take it on face value. But take a look at the following graph:
That represents the loans, in Read more