The Rag Reel

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Thursday, November 4, 2010

We Won't Get Fooled Again!



    Consider the Following:

  •    The FED reduced the interest rate charged to the banks to near 0%. The push was on to improve their (Banks) performance in hopes they could overcome the large losses from the default mortgages that they hold.

  •     Problem is few businesses an individuals wanted to borrow the money from banks due to the political an economic conditions that they face daily in the market place. Banks could not loan out the cheap money and make profits on the spread!

  •    Now the FED will buy U.S. Bonds held primarily by the same banks to again infuse money into them and take the risky debt of their books. The hope is the banks will lend out this money to small business and consumers to spur growth in the economy.

  •    Not So Fast - Banks will take the new cash and put it to work in foreign currency's, and stocks plus Gold. They will make money and our economy will not grow. It's another bailout for banks holding ever decreasing mortgage's. We get fooled again!

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