By continuing to throw money at the banks, the government is on the road to prolonging the recession and effecting massive inflation once confidence is restored and the economy then has too much liquidity. By making money available to the banks essentially for free, the Fed does not guarantee that the banks will lend out the money to businesses. There is no motivation to lend money at low rates when capital preservation (i.e., lack of confidence) is still a leading issue. Rates may be low, but the banks are not going to offer these rates to the individuals and industries that can make the most productive use of them — at least not until confidence returns.
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- liveonearth (
liveonearth) wrote,
liveonearth
liveonearth
Time Magazine's Recent article on our Economy
By continuing to throw money at the banks, the government is on the road to prolonging the recession and effecting massive inflation once confidence is restored and the economy then has too much liquidity. By making money available to the banks essentially for free, the Fed does not guarantee that the banks will lend out the money to businesses. There is no motivation to lend money at low rates when capital preservation (i.e., lack of confidence) is still a leading issue. Rates may be low, but the banks are not going to offer these rates to the individuals and industries that can make the most productive use of them — at least not until confidence returns.
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When time flies
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QotD: the cost of loving
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