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Thursday, December 18, 2008

0% Interest Rate for Central Bank Money

Author Thomas Ramseyer
Too much transparency does measures taken by the administration have no impact on economy

The backflip of the coin - transparency granted by media and education - as well as the one side of the coin - eight years' witnessing lying politicians - prevent the plebs from believing in the mantras of the administration taking over in january 2009 Erroneously the effect of the measure taken - forcing fed fund rates to zero - is interpreted wrongly

Finance community still believes that low fed fund interest rates trigger off cheap credits granted by commercial banks to firms to invest in infrastructure for instance. That is too easy; the higher the risks the higher the rates; thus growing margins. More important is the fact that liquidity only can be obtained by repurchase agreement activity on a level higher than the fed funds rate applying the primary credit rate at the federal system or at even higher levels from banks having enough GUTS and liquidity to put at stake.

The survivors have become most prudent and are clamping. Rules are being obeyed more strictly than ever. Still the whole pipeline from top to down and bottom up respectivly is being shaken by the situation given. At every turn FOR SALE markers shade the passer-by. In the streets aggressive desperate people offer goods and services just as carnival barkers. Daily news regularly announce the lay-off tsunami to grow. Durables remain on stock. At least food and beverage still is needed. Who knows for how long . . . . .

Just read your text book: The less consumption the more the layoffs. The more the layoffs the less the consumption. The less the consumption the less the confidence in the system. The less the confidence the higher the savings (if possible). The darker the outlook - because of highest transparency supplied by the media - the more reluctancy. And so on and on . . . the well known spiral has set off.

I believe the consumers to remember good old great grand mothers' advice not to live on credit at the mercy of some more or less greedy bonus-driven bank clerks or credit sharks. Thus back to the roots, save first not before after consuming. The golden rule of prosperity.

As well read:
© Thomas Ramseyer
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