Comments on: Facing the Storm

By: Tom

Tom — Wed, 19 Mar 2008 15:09:00 +0000

Well I just think that by trying to prevent every little recession, they end up with something like this.

It's like always putting out every little forest fire. It's natures way of cleaning out the excess. Free markets are very nature like. If the Fed puts out every little fire, then the underbrush builds up to the point that when a fire happens, it can't be contained.

They didn't have a choice. If they let Bear fail, things would have been very bad. I am just dumbfounded they they let it get to this point.

By: Megan

Megan — Wed, 19 Mar 2008 10:27:00 +0000

Tom, I hope I didn’t imply that I thought the decision to cut rates was wrong. I trust that the Fed knows what they’re doing. I had the opportunity a few weeks back to sit down with one of the governors on the Federal Reserve Board, and as I said then, I couldn’t blog about what was said in the meeting (the reporters were asked not to write about the things discussed that week, so I took that to apply to bloggers as well), but after hearing what he had to say, I had a lot of faith in what was happening.

Doesn’t mean I can’t be disappointed by it on a personal note. But I wouldn’t wish they were doing otherwise.

By: Tom

Tom — Wed, 19 Mar 2008 02:25:00 +0000

I meant to say “The FED had no choice BUT to cut rates.”

I just got home from the gym and the muscles twitch funny

By: Tom

Tom — Wed, 19 Mar 2008 02:16:00 +0000

The FED had no choice to cut rates. If they didn’t, you would have had financial catastrophe on your hands. I am not sure if you know what Credit derivatives are, but they are insurance contracts on defaulting debts. BSC going bankrupt would have caused a lot of dominos to fall. So why did JPM step up?

Look at this link. JPM has over 91 trillion in credit derivatives. They only have $1.2 trillion in assets. JPM could have been insolvent. I don’t think many people know this. JPM has written checks that it can’t cash if people try to cash them. Citigroup is number 2 and Bank of America who bailed out Countrywide from going BK and causing a derivative crisis. These banks along with the FED are trying to protect themselves and the system.

http://bp2.blogger.com/_H2DePAZe2gA/R9sT8yG-HKI/AAAAAAAAA7k/A-SlM2Kotng/s1600-h/OCCpg1.png

So what does this mean? Devalued savings and higher gas prices and food prices. Today was a good day for stocks. Will it keep up? Not sure. Will you pay for the rate cuts? Yup, we all will with less purchasing power.