Fed Cut; Money’s Free!!!
Yesterday the Fed cut lending rates to zero or near zero. I’m a little vague because they were a little vague.
We know Goldman and Morgan will be borrowing at those rates. The question is, will Smith and Jones be able to do so as well? The banks took the TARP money which was intended to trickle down to Mr. and Mrs. Main Street, and instead used the funds to shore up their own balance sheets and accumulate other assets. Will they now open the spigots to worthy borrowers at the retail level?
And if they do, will both Wall and Main Streets be able to pay that money back at some point in the future?
The answer to that lies in the ability of Wall and Main to use the money productively and profitably, and in the Fed’s pinpoint accuracy in assessing the proper time to reel in the accommodative monetary policy.
In other words, do the dollars they’re printing and dropping from helicopters get used to re-build the wealth that’s been decimated, and if it is, does the Fed stop inflating before we need a wheelbarrow full of dollar bills to buy a loaf of bread?
More questions than answers, I know. But, as the Buddha says, the first step towards enlightenment is the admission of ignorance.
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As a regular reader of this blog, I was hoping you would comment on this. Great insight.
It brings to mind a video I saw of Warren Buffett speaking to an MBA class – a student asked why he didn’t invest in Japanese companies when Japanese Banks lowered their rate to zero.
He responded that even with free money, he couldn’t find a good investment over there.
That raises an interesting point – with free money available in the US, companies and individuals with sound balance sheets should be making investments like crazy. Unless, of course, they can’t find any good companies to invest in, even with free money.
And if smart people can’t find good investments with free money, what chance do the rest of us have?
The youtube link to Buffett’s speech is http://www.youtube.com/watch?v=DfuXKpMFUjc&feature=related .
hi Mike. now that’s a value added comment.
many thanks, and stay in touch. LK
A debt crisis can’t be solved with more debt. Right now the amount of US $ in circulation is about 25% of the total US debt. Since money is only created by issuing more debt, THERE IS NO POSSIBLE WAY TO EVER REPAY ALL THE DEBTS. Ever.
The Fed is not a government agency. It’s a private bank cartel that is in control of our country with no government oversight. Apparently the Rothschilds and Bank of England are the major interests of the FED, but since that is all SECRET we have no way of knowing who really runs the US.
The system is structurally setup to NOT be sustainable in the long term. And now they have hit the wall of bankruptcy.
This is going to get much worse before it gets better. This is exactly the same situation that caused the USSR and Yugoslavia to collapse, reverting back into small independent republics.
That is what the Vermont Independence movement is all about: preparing for that inevitable collapse. Join the debate at http://www.mostlikelytosecede.com and http://www.vtcommons.org
This is no joke. IF you think it is a joke, the joke will be on you if you don’t have your local community and state prepared to take care of its own affairs.