Quote from aeliodon:
What a moron Ben Bernake is - he just made life more expensive for the hardworking responsible people of America to bailout reckless speculators.
A much Sadder Day for America than I could have imagined.
I posted this message in another thread, but I think this line of thinking is slightly misguided.
For the credit bubble to take place, two things had to happen. First, bank interest rates had to come down. Second, RISK HAD TO BE PRICED ARTIFICIALLY LOW. Meaning, if risk is priced properly, no bank would allow a borrower to take extreme leverage. Particularly INFINITE leverage in the case of borrowers not fronting up any collateral.
The secondary credit markets allowed bankers to heavily dilute risk and shove risk premiums to the wayside. Now that those markets are gone, banks realize that they will bear the FULL burden of risk exposure when making loans.
All those speculators and idiots in over their head on their assets took too much leverage to purchase those assets. There isn't a bank in the world who will be willing to refinance this EXTREMELY risky debt unless the refinanced debt could be repackaged a sold to the secondary market. Again, this market doesn't exist anymore.
This is exactly playing out like it did in Japan after its credit bubble burst. No matter how low the FED lowers the funds rate, it does nothing to stop risk premiums from growing now that everyone knows the credit game is up.
RoughTrader
... Ivanovich, I always enjoy your posts... and this one is no exception... 