Federal funds rate jumps to 7 %

[Neodude]

Quote from lrm21:

Everyone who supports the bailout uses the same uninformed argument that is 1929 and if we do nothing just like in 1929 we will have a bank run and a great depression.

Except.

1) There was a lot done in 1929 including the following
- Liquidity injections, Friedman was wrong credit contraction was beyond the governments ability to stop it because it was market reaction.
- government programs, plenty of those none of them worked.

How it is not even close to 1929
- FDIC insurance
- FIAT Money that can be inflated a much quicker rate, (unfortunately for that)
- Sophiscated banking system
- While Glass-Stegal was repealed many smaller and regional banks are still isolated.
- faster movement of information


There is a slow down in lending
There is most likely going to be a contraction
We will probably have a recession
But things will only get worse if you continue to have government intervention distort the normal market mechanisms add the compounding effect of increasing the national debt and burden on American Industry and Individuals for this massive wealth redistribution and you will truly get your depression

We are going to continue to prop up a dead industry and a mechanism the market is desperately trying to move away from. Additionally by centralizing market power in the government the incentives shift from producing goods the markets demand to manipulating technocrats.

1929 much distortion, Japan 1990 very much distortion

Its amazing how people use panic and fear mongering to justify this horrible horrible plan.

Banks are businesses they may regroup and credit may slow but it does them no good to pile cash to the rafters.

lrm21, you made some good points, but as I understand the argument it is basically "We are damned if we do and damned if we don't". So my conclusion is that I'd rather take a chance and do something in the hope that it will work, rather then stand back and hope that it will resolve it self.

I'm not sure what you do for a living, so I won't make guesses on how aware you are of what is going on at the bank trading and commercial lending desks, but from my vantage point I can tell you it is so bad that if this "credit" crises continues many good companies will not receive loans which they need to carry on their day to day business at fair rates. This situation will cascade down to every average American and cause good companies along with the bad to go under.

If the bail out doesn't go thru I sincerely hope you are correct and everything resolves on its own.

-Neo

 

[jordanf]

Quote from Neodude:


I'm not sure what you do for a living, so I won't make guesses on how aware you are of what is going on at the bank trading and commercial lending desks, but from my vantage point I can tell you it is so bad that if this "credit" crises continues many good companies will not receive loans which they need to carry on their day to day business at fair rates. This situation will cascade down to every average American and cause good companies along with the bad to go under.

-Neo

My knee-jerk reaction is how can you have a good, sound, long term viable business if you depend on cheap easy credit to do things like operate on a day-to-day basis or meet payroll? My father, brother and I all own small businesses, and the thought of running a business this way is a complete joke. But I'm sure I'm just naive.

 

[Bigpipn]

Fed Funds is a target, don't ever forget that.

This is much worse than 1929 simply because the government is substantially bigger this time.

When the government gets involved you lose the efficiencies of the free market. It's a bureaucrat hiring his buddies with no oversight to ensure that the job is done in an efficient manner. Government is a cancer in a "free market" system. The unfortunate reality is that the average person is cancerous (Stage 3) as well.

The only way to "solve" this problem is for a massive decrease in global population and a new system to evolve. It's that simple.

 

[Bigpipn]

Quote from jordanf:

My knee-jerk reaction is how can you have a good, sound, long term viable business if you depend on cheap easy credit to do things like operate on a day-to-day basis or meet payroll? My father, brother and I all own small businesses, and the thought of running a business this way is a complete joke. But I'm sure I'm just naive.

You're Anti-American, brother.

Leverage is Patriotism!

Load up on debt as much as you can so the fed can just inflate it away. I just maxed out all my available credit.

 

[Neodude]

Quote from jordanf:

My knee-jerk reaction is how can you have a good, sound, long term viable business if you depend on cheap easy credit to do things like operate on a day-to-day basis or meet payroll? My father, brother and I all own small businesses, and the thought of running a business this way is a complete joke. But I'm sure I'm just naive.

I think thats too simplistic of a view. There are such things as receivables.... It takes time for customers to pay for products, and therefore large multi-national companies operate on credit, not cash.

-Neo