Wednesday, October 29, 2008

Liquidity Held Hostage: Puttin' On The Puts



Here's the thing.

If it was all that cheap money in the form of liquidity handouts from Mr. Greenspan and Mr. Bernacke et al. (ie. the oft-repeated 'Greenspan Puts') that brought the world's financial system to the brink of total disaster in the first place why, exactly, are we doing it again?

The Fed dropped its key interest rate from 1.5 percent to 1 percent in a bid to boost economic growth and increase the availability of credit. Today's (Oct 29, 2008) rate cut follows a 50-basis-point reduction earlier in the month, when the Fed acted in concert with several central banks around the world to address what has clearly become a global credit crisis.

Now, of course, the business-types (ie. the ticker-chasers) will tell you that we have to do this to oil up the credit markets to avert further disaster.

Which kinda/sorta makes some sense, on the face of it I guess.

Except for one thing....

Which is the thing that anyone who has ever seen 'It's a Wonderful Life' (ie. everybody) should never forget.

And that is the fact that the big banks are, by-and-large, run by folks who don't give a hoot-in-heckfire about the rest of us or the greater good because they are too busy stepping on each others necks in an effort to become the supreme leader/lender in Potterville:

Many countries cannot quickly access the credit they need because banks are hoarding money and refuse to lend to each other.

Which means that, unless we stop this madness, the entire world may soon be running around loose screaming:


My suggestion? Pay the Greedheads off with Zsu-Zsu's petals and save the real money for the rest of us.


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