"The Fed," she argues, "has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible."
So even though the Fed has flooded the credit markets with cash, spreads haven't budged because banks don't know who is still solvent and who is not. This uncertainty, says Ms. Schwartz, is "the basic problem in the credit market. Lending freezes up when lenders are uncertain that would-be borrowers have the resources to repay them. So to assume that the whole problem is inadequate liquidity bypasses the real issue."
Friday, October 24, 2008
Anna Schwartz
Anna Schwartz is 92 years old, lived through the Great Depression, and wrote a book about it. The Wall Street Journal interviewed her about the current situation:
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3 comments:
Cameron, This is off topic, but in a few days we will be voting for President. That vote is more important this year than at any other time in our history.
It is imperative that we understand what the candidates stand for. And what Obama stands for is Marxism.
We Conservative bloggers have made the case that Obama is a Marxist but I don't think many Obama supporters understand why that is a problem.
I have written a post that explains why Marxism (Communism) is dangerous. If any of your readers don't understand why this election is so critical to the future of the United States, I suggest they read it.
Thanks Mark. I'll head over and read it.
Here is a good quote:
"Government big enough to supply everything you need is big enough to take everything you have..The course of history shows that as a government grows, liberty decreases." - Thomas Jefferson
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