The stock markets ended mixed today after the Federal Reserve announced they will keep the interest rate they charge the big banks at zero. This is intended to reassure investors that deflation will be held at bay but there was talk that the Fed would take other actions to stimulate the economy and they said they would pass on that.
The only other thing the Fed could do is buy paper off the market to reduce supply and inflate the value of existing holdings. Sweet if you don’t mind that they would just be printing money and passing it out to rich people. The same people that call Obama a wealth redistributing socialist want billions in free money printed for them because they can‘t drive the price up on their own. Surprisingly the Fed said no, this time.
So for now Wall Street is languishing in the doldrums just like Main Street. You see besides a money supply an economy needs to actually circulate the money or the economy can start to slow down and grind to a halt. On Main Street, the workers make things, get paid, go buy other things and the people selling those things hire more workers; you get the idea. Wall Street works by convincing people the products that they sell (things don’t really represent anything tangible) that these things will continue to go up in “value” and do that endlessly; you get the problem with that idea. If you don’t, you’re a Republican.
Banks aren’t loaning money because they can make more money doing high speed stock trading. Corporations are sitting on a trillion in cash because they are sure the stock market will crash and they can buy their own stock back for 10 cents on the dollar and make a killing when it rebounds. Assuming there is a rebound. The Fed refusing to bail them out may force them to consider making loans and building factories, maybe, unless they come up with a better scheme.
To end on a bit of good news; Obama is giving Larry Summers the boot (the economic adviser that was a prominent player in the Clinton Administration’s decriminalization (I mean deregulation) of Wall Street) , okay he’s quitting to spend more time in academia. Elizabeth Warren in, Larry Summers out.
Sounds good if the rumor the corporate media is circulating isn’t true that Obama is looking for a corporate hack to replace him. Likely it’s something corporate America is wishing for and not something they know for a fact. Elizabeth Warren was a surprise, maybe there will be more. www.prairie2.com