Posted on 10/09/2008 3:26:00 AM PDT by gpk9
In the past day or so central banks around the world have reduced short term interbank lending rates to all time lows.
Wonderful.
Problem is, it doesn't solve the problem.
We don't have a credit crisis. We don't have a liquidity crisis. Companies with solid balance sheets, and individuals with solid credit histories, can borrow all the money they want.
We have a confidence crisis. Companies who lie about their financial condition can't borrow. Companies who offer fraudulent investments can't sell them. Individuals with lousy credit can't borrow.
Reducing interest rates doesn't solve a confidence crisis.
Only honesty solves a confidence crisis.
Reducing lending rates in a crisis brought on by easy money is insane or it is nefarious. You don't make a drunk sober by forcing whiskey down his throat and you may well kill him.
PING!
This is so true. I just received in the mail last week an offer to borrow $70,000 from BOA - with no questions asked.
I don’t need to borrow right now, but it does prove your point.
Dishonest people can’t borrow money right now at ANY interest rate.
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