Global rate cut does little to calm markets - Eye on the Economy-

Global rate cut does little to calm markets - Eye on the Economy-

"Until the credit crisis burst into the open in August 2007, the Fed largely confined its occasional market calming moves to setting short-term interest rates and lending money to banks through its 'discount window' — a quaint reference to the days when bank tellers stood behind barred windows to dispense cash. In just the past few months, the Fed has converted that window to a warehouse loading dock, offering over $1 trillion in loans to just about anyone who wants one."

Maybe I should call up and try to get a giant loan.

The reason this isn't working is that the original problem was way too much credit; way too much borrowing; way too much leveraging; and so on. And the cause of that was too much money available, according to the "Giant Pool of Money" theory.

Japan had a near zero percent interest rate for years and years because there was too much money. If money is cheap, then interest rates are low.

So there's tons of money available, but no one is loaning it out, because there aren't enough dependable businesses to loan it to, and because money was so cheap, people took insane risks, and so on and so forth. And the dumb-ass credit bureaus said this was all okay and gave businesses that were levered 30:1 AAA credit ratings.

People will start loaning more money out after they start genuinely checking out the credit worthiness of the businesses that want the money.

In the meantime .... major pain and suffering.

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