When this collapses it is going to collapse hard and it is going to collapse fast. Previous comments have it right too much debt now and not enough new money. It will be so fast because ultimately it will suck liquidity from one end of the economy to the other. Ultimately even the federal govt itslef won’t be able to borrow because there won’t be any money left. And when that happens, the abyss…

The subprime defaults/costs are still in the future (think pension plans, insurance companies ie: those who really lend long term).

There’s also the costs of inflation to pay. Having lent long isn’t going to produce happiness.

None of this relates to the Fed. The purpose of the fed is just to keep the game in motion as long as possible.

PS: I really liked the page in Greenspans book where he is talking to some banker(?) for China who says you aren’t a capitalist country, you had price controls. And Greenspan (he who controls interest rates) says we learned our lesson. I only read that one page — it was enough.

I always thought they would postpone it until after the elections but now I’m not so sure. A burst of oil above $150 for any length of time would probably do it.

The monolines are now essentially defunct and with that trillions of dollars in guarantees in bonds, swaps and derivatives are now naked and ready to be downgraded.

Bernanke isn’t pushing on a string, he’s pushing a corpse.

These rate reductions have been for the banks only and staves off another major meltdown on a temporary basis.