> Dana wrote: > what's the actual problem? When you strip off the rhetoric and > conventional wisdom, it seems to me that the root of the problem is > that people do not have money to spend,
That's not the problem - yet. Unemployment is at 6.1% which is the highest in a decade but not anything _by itself_ that is causing this problem. And it is a cashflow problem, but not with consumers - yet. The problem is that business credit has ground to a halt because the scrutiny on any given loan is punitively high. In other words, nobody wants to be the person to have just made the next stupid loan. The lenders have lost confidence in *anybody's* ability to pay. The downward spiral is that when these types of loans stop, it creates a cashflow problem for businesses who then have to layoff workers which then impacts other businesses ability to pay their loans which creates even more doubt in the credit markets. For example, many businesses borrow on their equity. If your stock price falls it's harder to borrow. This adds more to the uncertainty. At some point, this credit uncertainty spreads to consumer markets: home loans, car loans, student loans, credit cards, et al. With consumers at 70% of economy, rising fuel costs, inflation, rising unemployment, and slowing business . . . Now the spiral is in full swing and the economy is unravelling. Right now we've just got mostly tight business credit markets due to exposure to sub-prime loans that's not easy to quantify. Lenders don't know what their exposure is. That causes uncertainty. If the government steps, with some huge number, they can offer to buy up that debt. Thus lenders can now feel confident that even if their client has large exposure, the gov't will buy it off them and their ability to pay off a new loan will not be impacted. So the number needs to be large enough to make creditors feel there is plenty of money to buy up debt their clients may have exposure to. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Adobe® ColdFusion® 8 software 8 is the most important and dramatic release to date Get the Free Trial http://ad.doubleclick.net/clk;207172674;29440083;f Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:271117 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=89.70.5
