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Federal Reserve Chairman discussed the current economic and financial condition (speech transcript), outlining what happened with Fannie Mae, Freddie Mac, Lehman Brothers and AIG--and what the Fed is doing--and said, "Overall, the combination of the incoming data and recent financial developments suggests that the outlook for economic growth has worsened and that the downside risks to growth have increased."
Eep! The Dow ended the day down 5%--down 508 points to end at 9,447--while the Nasdaq was down 5.8% and S&P 500 loves 5.74%. But Bernanke did end with, "I believe that the bold actions taken by the Congress, the Treasury, the Federal Reserve, and other agencies, together with the natural recuperative powers of the financial markets, will lay the groundwork for financial and economic recovery," so it's all better, right?
It's believed the Fed may lower the interest rate at its meeting in three weeks. However, CNBC reports "Many Fed officials had argued that lowering rates further would do little to spur economic activity while credit is jammed, and they have warned that with inflation already at worrisome levels, easier borrowing terms could set the stage for problems when the economy picks up."
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700 billion dollars of people's money spent, and we're still going down!
that bailout plan worked out really well!
I guess we have to lower the interest rates to facilitate lending, but our currency is going to take another hit.
How about pegging the dollar back to gold?
Ouch! It's gonna hurt....
I, for one, think we should bless some more animals.
It's always, always at the end of Sept - Oct. Worst times for the market, historically. Seems the market may be pissed off and is taking it out. I could see it bottoming out around 8600 and then slowly going up from there after a long hibernation. Probably not till 2012 before we're back up over 11000.
I am so giddy! I can't wait until the Hyperinflation and the utter chaos and carnage AND mayhem!
It's just gong to be TOTAL hellish nightmare.
All in the opportunity my friend, this will level the plain field back to 0.
This is the age of information, those who truly know what's going on will be better prepared then those who don't.
And while plenty a sheeple will handle this in a very obvious/expected way, those who know the deal will know how to use this strategically.
700 billion dollars of people's money spent, and we're still going down!
that bailout plan worked out really well!
I don't think they have done anything yet in terms of actually implementing "the plan".
The treasury is still in the process of hiring asset managers to oversee the of buying distressed assets. I imagine the markets won't be effected by this plan for weeks as the Treasury simply can't flip a switch and buy $700 bln in mortgage backed securities.
The continually drop in the markets is clearly an indicator expressing how bad the credit markets are right now. The Fed is now backing commercial paper so companies can continue financing their operations, this is a historic event... Could you imagine what would happen if next week Procter and Gamble could not make payments to suppliers, payrolls, and other entities that they due business with because they didn't have access to credit because banks are tanking?
Ironically the decoupling of countries that economists have been forecasting for years is not taking root. Emerging markets are tanking and even Europeans are flocking to US Treasuries that are barely paying yields, propping up the dollar. The dollar has surged against the euro more then 8% in the last week. There will likely be coordinated rate cuts across many economies in the coming weeks and the dollar will continue to strengthen as there is a flight to quality...
The bailout plan was advertised as a remedy to the crisis of confidence. As soon as investors would hear that the governement is ready to back the toilet-paper, which the banks call "securities," to the tune of $700,000,000,000, everything would be OK.
Oh wait...
@yg
you seem very naive
@Karate Kim
I
FinanceGuy123, I believe in regulation, not intervention, by the government.
Yg, if you shit in a toilet and don’t flush, guess what, there is still shit in the toilet. To get the system functioning again and attract people to use the toilet (like other investors to re-capitalize the bathroom with toilet paper) someone needs to flush the toilet. However this shit has been sitting so long the stench is permeating other rooms (US companies) and now our neighbors (Europe, Asia, Latin America, etc…) The government devised a plan to clean the toilet and freshen up the bathroom by use of scrubbing bubbles and glade fresheners so others can try and use the bathroom (Fed lending facilities, bailouts, etc.) but the toilet is still clogged and unusable effecting peoples ability to shower. We need to wait for our fat plumber from roto-rooter (private asset managers) to come in and unclog this mess… In the mean time people will need to wait for the shit to clear before there is confidence.
Karate Kim, your comments are scat-tastic!
But seriously, thanks for the explanations. I'm just a lowly artist and have no idea if what you're saying is true, but it sure sounds smart, and it's always nice to have an intelligent commenter around here.
Google 'Bilderberg'
The New World Order is picking up speed; been going on decades now.
Uncle Ben should resign. Just two months ago he said inflation was on the decline and things were looking up. What an idiot. Replace Uncle Ben with Sheila Bair the FDIC Chairwoman.
At the same time Uncle Ben was saying things were looking up, Sheila Bair said the complete opposite. Because she had no reason to BS. There were over 100 banks in trouble two months ago.
#15, I am very much aware of that and it looks like they are in PHASE 2 now.
The Globalists have the people right on the jugular.
Karate Kim,
I'm sorry, but your analogy does not make sense.
Does the "shit" in your analogy supposed to be the funding that is not moving and staying in the investors' accounts? If so, why is it stinking? Funding certainly is a good thing and we shouldn't flush it, but rather encourage investors to invest. Instead the government took it upon themselves to move the money around. Not their money, I remind you, but our money.
One the other hand, you've said: "if you shit in a toilet and don’t flush, guess what, there is still shit in the toilet." Well, then I guess you've meant something completely different! (Never mind that it doesn't tie up with the rest of your post).
Well, I'll have you know, I did not shit in our collevtive toilet. It was the irresponsible banks and irresponsible borrowers who did that. And I'm not willing to shell out $700 billion dollars to bail them out. Fuck them, it's their own fault, and they should pay for their mistake.
The stock market is down because of them? Excellent! A great opportunity to buy some stocks! Some not-so-well managed companies might have problems? I'm fine with that as well. There's nothing like economic Darwinism to bring out the best to the top.
This market is a bad news market and there's more bad news on the way: GM is approaching a Chapter 11 filing, Ford is not far away; the Fed is now doing direct lending to business which is good if you are a Fortune 500 in search of an attractive rate, but that leaves the banks floating aimlessly out there. The FDIC will likely begin to be tested soon: can they cover the new deposit insurance limits? The Giori presses at the Bureau of Engraving and Printing only work so fast...
Yg, I guess my analogy went over your head. I was trying to make it something you could relate to. I was referring to toxic assets on banks balance sheets.
“Funding that is not moving and staying in the investors' accounts?” I think you misunderstand what commercial paper is, it’s simply a line of credit to a bank. Given the deterioration in banks around the globe and other investors that have been screwed (like sov wealth funds that timed this thing horrible wrong), you’re right we should just encourage other investors to invest because past track record is great... In fact if you think it’s such a great time to invest why don’t you put your money where your mouth is? I hear financials in Europe are ripe for growth.
You may not have shit in the collective toilet, but you seem to be full of it.
Very good grasshopper.
I generally agree that the government should not be interfering with the markets except to properly regulate certain entities. But it is the Fed's mandate to act as "lender of last resort" to extend credit to depository institutions where their failure would have devastating ramifications on the economy. We are in uncharted waters and there is no map. These are extraordinary times and there is flexibility with the Fed's mandate to extend credit to "other entities" hence propping up of commercial paper markets. In making credit availible they are just trying to curb day to day fluctuations in the economy (i.e. attempt to maximize employment and keep the system intact through stable int rates and prices.)
Sure there are great companies to invest in and I'm sure some large ones will go down in a ball of flames, only to be broken up into smaller more profitable bits. And maybe the smaller companies will maintain AAA ratings to secure cheap funding through CP (probably not) but you're fueling increased unemployment from the layoffs that are sure to come, deteriorating tax bases and adding a whole host of additional problems for the economy. Should the gov be interfering with finacing issues for private sector companies, not really... But when LIBOR is spiking almost 50% in a week, which is because banks aren't lending to each other, which dries up funding for major US companies, I think the gov needs to step in and do something, that's just me.
Hit me up next time you need to get schooled. - Your sensei...
So when times are good you don't want the govt to interfere, but when going gets tough you run back crying to you mommy.
Here's the summary of your last post: Privatize the profits, socialize the losses.
Unfortunately the layoffs will continue in any case, that's because the economy is sinking. But rather than fixing the rules, all the govt is doing is rewarding the behavior that fucked up the economy in the first place.
BANISH PANIC
Keep your composure
Do not curse
Live for the moment
Gonna get worse