Heidegger

Cologne 04-Oct-2008

Jan Straathof schrieb Thu, 2 Oct 2008 17:40:16 +0100:

> >AC: The 1999 NYT article that Michael posted extrapolated the current
> >crisis with perfect accuracy before the Fed funds rate was ever lowered.
> >So the problem was not the lowering of rates in general, but the
> >artificially induced lowering of rates for low-income demographics,
> >for the purposes of social engineering:
>
> JS: I am of the view that the key here is the creation of bubble
> activities,
> i.e. money pumping, abnormal low interest rates. Hence what matters
> are the actions by the Fed.
>

ME: There’s plenty of blame to go around (blame = _aitios_ = cause). The
ultra-low short-term US interest rates helped to keep the economic interplay
going after the bursting of the dot-com bubble, but they also opened the door
to the risky, imprudent strategy of borrowing short and lending/investing
long. E.g. Bear Stearns, which profited enormously from mortgage
securitization, needed USD50 billion each day (!) on the overnight repo
market to keep ticking over. It was no means only Wall St. that was
imprudent. Banks throughout the US and worldwide indulged. Even staid German
State banks such as IKB and the State Bank of Saxony invested heavily in
highly lucrative securitized debt, and then went down the drain when the
markets for these securities evaporated.

There is also a certain justice in Fannie Mae and Freddie Mac having to be
socialized by the government because it was government policy in the name of
social justice, with the support of the well-meaning US electorate, that
underwrote lower-than-market interest rates for ‘discriminated’ social groups
to the tune of trillions. This well-meaning policy depended on the Fed
keeping interest rates low to enable poorer house-buyers to make the
threshold to eligibility for a mortgage.

_-_-_-_-_-_-_- artefact text and translation _-_-_-_-_-_-_-_-_-_
_-_-_-_-_-_-_-_-_-_-_-_- made by art _-_-_-_-_-_-_-_-_-_-_-_-_-_ http://www.arte-fact.org _-_-_-_-_-_-_ artefact at t-online.de _-_-_-
_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_ Dr Michael Eldred (c)_-_-
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Posted on Sunday, October 5th, 2008 at 6:01 am
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