I was surprised to read the editorial in BusinessWeek that we shouldn’t worry (Americans that is) as the Fed has a whole kit bag of solutions to stop the financial crisis entering the real economy. I just don’t believe this, I think in some ways its already too late as the rot has set in. The banks don’t trust each other and won’t inter lend so that’s going to be even worse for the rest of us in the great unwashed public, and we already see that here in the UK with the withdrawal of thousands of Mortgage offers and deals.
Soon, this will migrate to restricted lending on non-mortgage loans and finance which means cars, household goods, home improvements holidays, in fact everything expensive. So as soon as we can no longer get finace for a new car we won’t be able to buy them, which means car manufacturers can’t sell, which has a knock on through the supply chain and then onto other supply chains.
Somehow the solution has to be got going now and I believe that to be a fundamental massive increase in liquidity for banks to get back to offer us all finance and stops the wheels of industry seizing. Ultimately even the rich countries like the oil states, China etc will get dragged in, probably after they have bought all the major US/UK organisations for knock down prices.
I know increasing the liquidity supply could just allow the banks to make more money (or lose it) but thats the lesser of two evils when compared to global stagnation in the way Japan was hit.
Anyway, here’s hoping…
