<p>It’s a good thing because we have to protect the brokerage firms and the banks from themselves.</p>
<p>It’s also a good thing because if this didn’t happen we would find out that capitalism gives us good economies, booms and …“DEPRESSIONS”. So it’s good we have a Soviet style bureaucracy controlling our money.</p>
<p>I just wonder because I read on this board how smart these hedge fund managers, brokerage management, and private equity people are, even though they have engaged in investments that were incredibly leveraged.</p>
<p>Maybe they are smarter because the bailouts are here. $130 BILLION in Europe today. Just $24 billion in the US today, but I’m sure there will be more tomorrow. </p>
<p>The banks in Europe believe in the intelligence of fellow bankers so much that they don’t want to loan any money to each other. (The LIBOR rate was up 50 basis points today, a huge move). They don’t trust each other. The bankers in the US were slightly better than their European counterparts. Slightly. </p>
<p>Free markets are great. They are great as long as profits from them are taxed at lower rates than other income. They work real well when markets go up. </p>
<p>Anyway, the next time I read about free markets and our belief in them, I’ll remember days like this. ;)</p>
<p>The Feds overly hawkish stand on interest rates is not helping. A little sugar helps sometimes. A little inflation is not the end of the world either.<br>
But I agree on the snarks about all the"smart guys". Truth is some of them are already shutting down and more will follow so we can enjoy that. Problem is the overreaction takes down lots of good people too.</p>
<p>I disagree that the Fed is tight. Inflation has been running around 4% for a long time. I know it’s spun differently with the core, but the core is bs.</p>
<p>Then again, if the Fed really let this credit bubble unwind, we would get deflation and the Fed would eventually have to cut rates.</p>
<p>I would like to see the Fed let some of these funds run by the “smart” people blow up first before they cut. </p>
<p>“Problem is the overreaction takes down lots of good people too.”</p>
<p>It does, which is why we will throw a lot of money into the system, to limit their losses and stabalize the economy. We will devalue the dollar, which hurts many people, especially the working man and savers. But devaluing the dollar helps other people, borrowers, exporters, and people with lots of leverage.</p>
<p>Throwing money into the system also helps the very idiots who leveraged to the hilt and got stinkin rich, but now are at risk. These are the same people that are going to push free markets, no government handouts to the working class and the poor, and are going to go around acting like they are smarter than everybody else. The people begging the central banks to flood the financial system with cash so they don’t blow up. Financial experts. ;)</p>
<p>I agree that the firms that made poor decisions that can no longer stand their losses should be allowed to go under so there can be a bit of the survival of the fittest.</p>
<p>One way the Fed can add money to the financial system is by doing repos. It means the Fed added $24 billion into the financial system today. This made it easier for banks that need money to get money.</p>
<p>Many ARM loans, fixed rate loans, cash value insurance policy loans, credit card loans are based on LIBOR. Money just got more expensive to borrow.</p>
<p>The best economic book I’d suggest for going through basic concepts in micro and macro economics would be Naked Economics by, I believe, Charles Wheelan. It’s easy to read and easy to understand.</p>
<p>If the damage could be contained only to the big banks that created the problem I’d let them suffer their losses. But it quickly spreads to the innocent and we need to keep a decent economy going.</p>
<p>A decent economy for whom? A 50% drop in housing prices would make it possible for all kinds of middle-income ($53k being the median) to actually purchase homes. </p>
<p>I’ll volunteer my home for the first 50% cut. I’m willing to put my money where my mouth is.</p>
<p>For starters a very decent economy for residents of our state. How soon we forget what a really ugly economy looked like–think Jimmy Carter. You don’t hear much about not being able to rent Uhauls in the Midwest anymore because they are all in Texas. Farmers are having a HUGE year. Our shop has hired 10 people in the last 2 years with an average income in six figures. Most are still in their 20’s.</p>
<p>Even you state workers are getting a big fat raise this year.</p>
<p>“Nice bailout today. Fed cuts the discount rate and will buy mortgages.”</p>
<p>Absolutely right that this is a bailout. Everybody will foot the bill through higher inflation, but it beats the altenative of footing the bill through a credit crunch that puts people out of work.</p>
<p>I applaud mini’s willingness to put his money where his mouth is, but way too many people have been all but duped into paying way too much for their homes and have them hocked to the limit to among other things feed the coffers of heavily endowed and tax sheltered colleges and universities. </p>
<p>There are a lot of villains here. I have little sympathy for the hedge funds and even less for the realtors and politicians and newspapers they all but own. They all fed the frenzy of this real estate bubble to their own profit.</p>
<p>I fail to see why the FEDs action is considered a bail out. It is only easing the credit crunch and is not a government give away.</p>
<p>The governments role is to even out the extremes of market conditions. The FEDs interest rate policies were seen by some as reining in the stock market gains by its focus on inflation.</p>
<p>Yep, hedge fund investors have lost tons of money and the government should not bail them out. But if the FED can take action to give the fund managers some tools to dig themselves out of the hole that is a good thing.</p>