Quote:
Originally Posted by tabs
Very well might come about....
To combat inflation the Fed would have to raise interest rates in an environment where the liquidity of Stocks and Bonds are a very serious issue.
The Fed is having difficulty keeping the system liquid by lowering interest rates as it is, because no one knows what portion of the Sub-prime loan packages that they hold will default. Thus they don't know how to put a valuation on them, and nobody wants them at any price. This then effects the Stock Market because no one knows how much exposure they have to the Sub-prime market and the ultimate effect on the economy and corporate earnings.
U all should remember the name Citi-Corp and the name Richard Ruben as the head of Citi.. remember he was Bill Clintons Secratary of the Treasury.
The perfect storm is abrewing on this good ship lollipop. You can only go to zero percent interest rate to keep the system liquid. Meanwhile the $$ is falling in value because of the decling credit worthiness of the USA. Since the value of the $$$ is falling foreign capital is not flowing into the USA which causes the system to become more illiquid and intest rates to be pushed even lower to prop the system up. At some point the music has to stop.
It is possible for the whole system to freeze up and become illiquid. That means Stocks, Bonds, Money Market Accounts, CD's, 401K's, Mutual Funds, Pension Funds all stop having value because you can't trade nor sell them. The $$ will havve by then declined to almsot nothing anyway. Then what happens to your job? Yeah ya gotta love those Pats!
The net effect is that American Financial Institutions are drawing in capital from NATIONS (as opposed to businesses) that are sitting on piles of $$$ that are doing nothing but stuffing mattresses in places like the United Arab Emirates, Dubai, Singapore, Hong Kong, Beijing, Toyko, Taipei and Seoul. They will lend our institutions the money, but the interest they earn on that capital will be going overseas and not staying in the USA. That in effect means that the wealth of the nation is leaving and we are beocming poorer... But Hey what about those Pats!
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tabs, Bush presided over this mess, so who in the hell do you want to blame? Slick Willy again?
Clear this up for us: so you think that it's not a bad thing that Team Bush has tripled our national debt to over $9 TRILLLION dollars or that they have done nothing to hinder, much less fix, the fact that around $800 BILLION of our dollars now goes flowing off to foreign nations? Plus, Team Bush has conducted a 7 year war that is expected to reach a total cost of over 12,000 $BILLIONS (just want to see if you really know what those numbers stand for) basically by using his non-existent credit card. The only major war in the history of the world to be financed by credit, by the way.
Ignoring those things above per our economy is a true "good ship lollipop" and pretending that the sub-prime housing mess (that Bush also presided over) is the main reason is equally absurd. This was going to happen regardless, the sub-prime just probably made it an issue a tad quicker.