The Easy Money Withdrawals
August 31, 2007
– Comments (6)
The market's reaction to Bernanke's reluctance to really pull out all of the stops and flood the market with easy money to "solve" the credit problems has been pretty funny. It makes me think of an addict going through withdrawal from a drug (or shopping for that matter...).
The rant by Cramer, which I'm assuming most have seen by now, was probably the best example -- he was practically foaming at the mouth screaming, "give me the money! give it to me!" I'd say the same goes for commentators and executives that have been vilifying Bernanke, saying that he's too much of an academic and just doesn't understand -- "you don't understand me! I need the money!" Just picture somebody detoxing and writhing on a bed in a locked room. I love it.
Only time will tell whether "no-helicopter" Ben is doing the right thing, but I've been amused nonetheless.
Interestingly, at this point I would be much happier if the Fed didn't lower interest rates in September. And I don't mean that from a "the evil bankers should suffer" perspective. Given Bernanke's perspective on the market turmoil, a rate cut in September would mean that he sees serious threat to economic growth. That's not good. On the other hand, if they don't cut rates, it suggests that they see the situation working itself out at least to some extent, and that the economy is holding up.
Of course, I don't fool myself into thinking the market participants will see it that way, it would be like telling an detoxing alcoholic that a glass of milk would be healthier than a Jack on the rocks. It's true, but I doubt he'd care.
Kopp
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