The Stock Market Collapse

This crisis in the Stock Market should be a serious worry to us all. There was a good peice in the Telegraph this morning, about the possibility of a major US bank defaulting, and another in the Guardian suggesting that we might be about to see a base rate cut by the Fed.

What should worry us about this is not the possibility of a bank defaulting, but the possibility that by pumping more liquidity into the market we will be supporting the reckless economic behaviour which has led to this crisis and make a future economic collapse worse.

"But what if the Fed cut rates because it knows something the markets don't? What if a major US bank really is in trouble? Even if America now implements the "nuclear option" of a sudden cut in the "Fed funds" rate - the equivalent of our base rate - that may not help very much. Hundreds of US mortgage lenders, thousands of house-builders, and millions of Americans have already gone bust."