| I am sure plenty would disagree. I don't think raising rates earlier would have made any difference. FED rate changes have more to do with short term borrowing, banks, and larger companies. The individual joe is affected little by the rates at this level. And besides, when your looking at a market where you could potentially make 200% a year the way some of those stock were rising, who cares if the rate was 2% or 10% because you still beat the rate game. Rates became an irrelevant factor in the later stages. Individuals borrowed to the hilt to buy stocks. Corporations borrowed to the hilt to keep expanding capacity at an ever increasing rate. Ultimately though, as the rate of credit expansion and capacity production continued to increase, it hit an unsustainable level. Any time a trend turns parabolic, mathamatics says it needs an ever increasing force to keep it going, until it sees infinity. Eventually it has to break. And, since the bulk of the run is based on credit expansion where bad credit is put on top of bad credit and etc., the critical line was pushed higher and higher until it caught up with the market top and broke. Now we have a chain reaction on the downside where all that credit needs to be paid back, which leads to stock liquidations to raise cash, which leads to price declines, which leads to margin calls, which leads to stock liquidations, and so forth. Eventually, it will wash out, but the pyramid has been stacked quite high and the FED has little control over it now. The raising of rates too fast at the height of the bubble is irrelevant as those rate increases are long gone now, and the bubble was well on it's way to peaking out when they did raise them. If anything, the FED kept the bubble from going even higher, but the burst was inevitable. |
