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Politics : Welcome to Slider's Dugout
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To: RonMerks who wrote (6443)9/18/2007 9:56:40 AM
From: jim_p  Read Replies (2) of 50015
 
Ron,

The credit markets are still frozen and the extent of the damage to the economy will depend on how long they stay frozen. At this point we (the market) don't know, but as time goes on the extent of the damage is increasing. A fed rate cut will not free up the markets. The issue today is not the cost of funds, it’s the availability of funds.

In addition, there were some good points made that this is not a typical credit crunch because of the fact that there are real losses in the system. The following article should be read and studied by everyone, it goes into detail on why this is not a simple credit crunch.

paulvaneeden.com.

The last point is the market has not factored in the extent of the losses because this is still unknown. My guess is the market may have factored in $200 billion and the real number may end up being in excess of $1 trillion. Just like with the S&L crisis that estimated loss continued to increase over a period of four + years before it became clear.

This is a long term process.

Jim
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