On Oct 2, 2008, at 11:12 AM, Jim Devine wrote:
Shane Mage wrote:
As far as I know, the Fed's discount window is still wide open.
The banks can borrow as much--short term--as they want.
So why the hysteria about the financial system "freezing up"?
If banks don't lend to homeowners or consumers, that's not the
cause of a
depression.
It's the result.
The "fundamentals" are rotten.
Solution (as always): Inflate, Inflate, and Inflate some more.
the problem is not a liquidity problem, where discount loans help. The
problem of "freezing up" is with bank capital, collateral, and
longer-term credit: this is where the "fundamentals" being rotten
comes in.
Exactly. So then, if short-term ("liquidity") is no problem, why the
hysterical
call (and response from "leftists" like Henwood) for a $700b reflation
of the banks'
*capital* structure? Why is this presented as so extreme a crisis as
to preclude careful analysis and prolonged debate? Because, as Naomi
Klein has been telling us, only in conditions of media-generated
hysteria can such a massive swindle be forced down the throat of the
populace.
In this case, the banks refusing to lend to homeowners, small
businesses, and consumers is not only the result of a "depression" (or
whatever we call this mess) _but also_ a cause. There is "cumulative
causation" or a "vicious circle."
But these cycles take time measured in years, and action is demanded
in *days* (at first in hours, but what the hell..) Hysteria passes
and banks--whether in receivership or not--are still in business to
make profitable loans. That the loans are not expected to be
profitable is exactly what is meant by "rotten fundamentals."
Shane Mage
"Thunderbolt steers all things...it consents and does not consent to
be called Zeus."
Herakleitos of Ephesos
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