by Mike Whitney / March 15th, 2008
It’s another round of the credit crisis. Some markets are getting worse than January this time. There is fear that something dramatic will happen and that fear is feeding itself.
– Jesper Fischer-Nielsen, interest rate strategist at Danske Bank, Copenhagen; Reuters Yesterday’s action by the Federal Reserve proves that the banking system is insolvent and the US economy is on the verge of collapse. It also shows that the Fed is willing to intervene directly in the stock market if it keeps equities propped up. This is clearly a violation of its mandate and runs contrary to the basic tenets of a free market. Investors who shorted the market yesterday, got clobbered by the not so invisible hand of the Fed chief.
In his prepared statement, Bernanke announced that the Fed would add $200 billion to the financial system to shore up banks that have been battered by mortgage-related losses. The news was greeted with jubilation on Wall Street where traders sent stocks skyrocketing by 416 points, their biggest one-day gain in five years.
“It’s like they’re putting jumper cables onto a battery to kick-start the credit market,” said Nick Raich, a manager at National City Private Client Group in Cleveland. “They’re doing their best to try to restore confidence.”
“Confidence”? Is that what it’s called when the system is bailed out by Sugar-daddy Bernanke?
http://www.dissidentvoice.org/2008/03/roubinis-nightmare-scenario-a-vicious-circle-ending-in-a-systemic-financial-meltdown/