The 'Hail Mary' feel to the Fed's strategy of tackling receding growth through rate cuts and leaving inflation unattended until the economy strengthens is intensifying.
Plus, none of the Fed's moves really addresses the huge lurking problem at the root of the present crisis, the loan market. Because banks, lenders and their partners who insure all their loans are still not fessing up to how much bad debt is actually swilling around in their respective industries, any solutions are bandaids on what may amount to be a carcass.
Some of these companies are so extended that it doesn't matter how much cheaper it is to borrow, they just can't.
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1 comment:
Actually, I think you're right. We had sort of a binge of reckless lending right at the tail end of the boom, which, come to think of it, is what always happens. There aren't a lot of smart bankers.
Th problems are more concentrated on the consumer side of things, though. Not so much on the corporate. For the most part, corporate balance sheets are pretty spiffy, which should help to buffer the downturn.
As for inflation, I think it's almost entirely energy plus the boneheaded boondoggle of ethanol. Ethanol has had the effect of skyrocketing food prices while not doing a damn thing about oil. A textbook example of the unintended consequences of government interference in markets.
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