Don’t Panic!
Jan 23rd, 2008 at 12:04 pm by Susie
Reactions to the US Federal Reserve’s dramatic 0.75 percentage point cut in interest rates ranged from hostile to lukewarm as policymakers, businessmen and economists gathered at the World Economic Forum on Wednesday.
Economists at the meeting warned that the monetary easing announced on Tuesday would not succeed in boosting a sickly US economy. Moreover, they said, by reacting to turmoil in equity markets, the Fed seriously risked creating the impression that it was most concerned with ensuring investors did not lose money.
Stephen Roach of Morgan Stanley said that the Fed’s policy of cleaning up after a bubble has burst was “a dangerous and reckless and irresponsible way to run the world economy”. “It was market-friendly action,” he wrote in his FT.com blog from Davos, asking: “Is that the way to run a central bank?”
Sir Howard Davies, the director of the London School of Economics and a former chairman of the UK Financial Services Authority, the UK financial regulator, agreed with Mr Roach. He said the move reminded him of the character Corporal Jones in the long-running UK sitcom Dad’s Army, who always shouted “don’t panic” just when he and everyone else were doing just that.
We have just seen the most massive socialization of financial losses due to incompetent policy in the history of the world: nothing else matters except that STOCK PRICES REMAIN HIGH! Bail, bail, bail, as fast as you can. POUR tax money into the market and into guarantees tons more where that came from.
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However. Market dynamics are the same: resource limits are being reached; spending is totally out of control, entitlement obligations alone will break the country. When Google loses $40 BILLION of market cap, people should know there’s a dead stinking fish in this mix somewhere (That’s a big deal like the starship enterprise crashing into the sun). Idiots. Fools. Sheep.
The money does not evaporate, it just changes hands. I’d be willing to bet that a large portion of the recent market capitalization has ended up in Dubai, (in the basement of a recently re-located Texas corporation).