On 8/11/07, sartesian <[EMAIL PROTECTED]> wrote: > Think Julio has it right-- at top and bottom, it's all about class > struggle and how much the ruling class can force the workers to take. >
In that sense, it is *always* about class struggle and how much the ruling class can squeeze out of the economy. But this level of abstraction is not very informative in a specific unusual circumstance like this week. The present "crisis" is about class struggle in a very special way and it is worth trying to understand its dynamics a little better. In Julio's WSJ video, one of the guests points out that the Fed has three different options 1) provide reserves as it did on Thursday and Friday (cumulatively the world CBs have now provided a mind boggling $250B in just 2 days!) 2) lend directly to banks through the discount window. (I don't understand how this is different from (1). Does this mean they would lend without collateral??) 3) cut rates. This would effectively achieve the same results as (1) and (2) with less work on the part of the CB, but send a bad message to the markets that the CB would rather avoid. (They didn't mention a fourth possible option - lower reserve requirements for banks.) Will Friday's actions be enough? I think the real question is enough for what? Why does the Federal Reserve care so much about the lack of liquidity in the credit markets as long as the real economy is not affected? Why don't they just let these hedge funds starve and die? As Daniel Davies mentioned in another thread, there is no credit crunch in the real economy (yet). Why are they buying into Wall Street's phony act so readily? -raghu.
