In the US economy, we do engage government to get problems solved. People might still remember how longterm credit management was resolved and forced into bankruptcy.
One of the Feds(L.M.) was an investor in longterm credit management. The brokerages that handle the transactions had to give up some of their profits to make investors whole.
Many new ones such as Bear Stearns subprime investments, has to be saved temporarily by a loan from the overnight discount window. In 1987, Merrill Lynch was the vehicle to keep up the backroom trading transactions straight; and the overnight discount window loaned out $1.7 billion in October. since then(under G.H.W.Bush's administration) each year, we do that, and be ready but never used any loans except this year for Bear Stearns. But in October, we will have $16 billion ready this year, as derivative gambling surface in October. Last year, Nymex had their own isolated problems(gambling in higher priced crude). This year, the president of Nymex may make the same mistake, again. He did not know the benefits of using alcohol. Crude value is determined by the conservation policy, not supply and demand, because we have technology to make substitute.
Alan Greenspan was sweet on Chase(former employer), and had supported JPMorgan/Chase with treasury backing after 2001 bubble busted(huge loss in equity because of 6.5% interest rate policy). and we will continue with that government support policy as long as the chief of staff at the Feds knew what Greenspan did as a precedent.
This type of government action is generally hidden from the public. But we all have to know, that not all deficit is from the Irag/Afghan war. |
