There is No Easy Way Out of This Mess
We cannot fool ourselves into believing that the $700 billion bailout of our financial system will cure our economic problems overnight. It took financial institutions at least ten years to create this mess. Unfortunately, I don’t believe that Treasury Secretary Henry Paulson or Fed Chairman Ben Bernancke understand the extent of the crisis.
As I write this story, the Dow Jones Industrial Average is below 10,000 points for the first time in 4 years. The markets are realizing that unwinding this mess that was created by greed and de-regulation will be not be easy or quick. But the stock market is not the real problem. The problem right now is that the credit markets, the market for loans and other forms of credit, are still frozen. There is very little lending activity happening and this lending activity is important to day to day operations of banks, companies and municipal and state governments. If credit markets remain frozen then economic activity will stall. Sadly, this may mean further job losses for hard working families. I don’t know what else to say right now other than let us hope for the best but prepare for the worst.
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