Saturday, October 16, 2010

Been There, Done That

Despite definitive assurances that the recession is over, somebody forgot to tell the 14.8 million people out of work. So Fed chairman Ben Bernanke has decided he needs to come up with his own stimulus package.

Economists are speculating that the Fed effort to boost the economy will be in the form of Treasury Bill purchases. Billions of dollars worth. The idea is that these purchases will lower long term-interest rates, making it cheaper for individuals and businesses to borrow to money to (using the examples from the Washington Post article) take out a mortgage or build a factory.

However, Bernanke seems to ignoring the fact that not only do most banks seem unwilling to lend, but most businesses and individuals don't want to borrow. What makes this putative Fed initiative seem even more surreal is that we've tried giving banks lots of money before.

And they didn't lend then. Why would they now?

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