[ExI] AIG Bail out

[Stathis Papaioannou]

2008/9/19 Lee Corbin <lcorbin at rawbw.com>:

>> What was even more amazing was that after this started to correct
>> itself, the fed's actions were to LOWER interest rates in order to
>> continue fueling the fire.
>
> Oh, that?  It's called a "stimulant". I hear Democratic politicians
> talking all the time about the need for a new "stimulant". Picture
> an alcoholic on the morning after holding his aching head, and
> the pretty little thing next to him saying, "Oh, Sam, you were *so*
> much more fun last night than now. What you need is a stimulant,
> so here:  here is what you need: $$$$$$".  And of course, the money
> flows, the interest rates are dropped the debt increased, the metaphorical
> printing pressed turned to ON.

The Federal Reserve understands that the nature of capitalism is to
have booms and busts, and attempts to smooth out the fluctuations
using monetary policy. They stuffed up: during boom times they should
have noticed what was happening and raised interest rates, then
lowered them when the economy slowed too much. The equivalent in
treating an alcoholic is to try to reduce his intake during binges,
but make sure he has a little alcohol (or a less toxic substitute such
as diazepam) when withdrawing, or he could go into the DT's and die.
Now you might say: let him die, that'll remove him from the gene pool
and maybe teach others not to drink.

Interestingly, many central banks are by design independent of
Government even though they are Government funded, rather as the
courts are supposed to be. Governments don't like this, in general,
because they have less control over the economy, but they have
discovered empirically, through the free market of economic systems
around the world, that it works better than the alternatives.



-- 
Stathis Papaioannou