FOMC statement:
The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 3 percent.
Financial markets remain under considerable stress, and credit has
tightened further for some businesses and households. Moreover, recent
information indicates a deepening of the housing contraction as well as
some softening in labor markets.The Committee expects inflation to moderate in coming quarters, but
it will be necessary to continue to monitor inflation developments
carefully.Today’s policy action, combined with those taken earlier, should
help to promote moderate growth over time and to mitigate the risks to
economic activity. However, downside risks to growth remain. The
Committee will continue to assess the effects of financial and other
developments on economic prospects and will act in a timely manner as
needed to address those risks.Voting for the FOMC monetary policy action were: Ben S. Bernanke,
Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall
S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser;
Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W.
Fisher, who preferred no change in the target for the federal funds
rate at this meeting.In a related action, the Board of Governors unanimously approved a
50-basis-point decrease in the discount rate to 3-1/2 percent. In
taking this action, the Board approved the requests submitted by the
Boards of Directors of the Federal Reserve Banks of Boston, New York,
Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, Kansas City, and
San Francisco.
http://federalreserve.gov/newsevents/press/monetary/20080130a.htm
excellent
A few weeks ago there was a crash landing at Heathrow, where the pilots kept pushing the throttle, but the engines didn’t respond. Is something like that going on here?
Gold going vertical…
Does anyone know the last time the Fed cut 1.25% in one week?
Anyone? Anyone? Bueller?
Was that Pavlov’s bell I just heard?
I always wanted to go to Japan, looks like it’s now coming to me.
ありがとうBernankeson!
Are you turning Japanese, turning Japanese, I really think so!
:)
D
Ben, the Street is your daddy…
Only 3% left to go!
zero! zero! zero!
Well, well, well……… WHAT A SURPRISE…!
I feel like if I’m in high school… You know, this really isn’t fair, I mean I really don’t know what to say. I’m actually embarrassed for these guys….
How pathetic they seem…
Econolicious
Markets remind me of the scene in Burt Reynolds movie ‘Cannon Ball Run’ where he and Dom Deloise pull in for gas. The vehicle has two gas tanks and Burt sticks a hose in each one. The attendant on the speaker yells out ‘whatta you doing, you got one leaded and one no lead’. Burt replies ‘She goes both ways’.
Up a thou, down a thou. This is one fun Dow.
all this to prop up Bush and the GOP for ’08.
Pathetic.
Re-read the first comment
“Financial markets remain under considerable stress”
and that’s all you need to know.
Inflation that is mentioned later, as in, that’s something we might think about in 2009.
I think this is the fourth straight move without unanimous consent, very unusual.
Call me crazy, but if the Fed’s expectation is continued moderate growth over time, why the hell do they need to slash 125 bps in the last week?
OK, this is a rhetorical question. For which I will gladly provide the answer:
“Financial markets remain under considerable stress…”
At least the Fed has finally come out and tacitly admitted what we’ve known all along: they are trying to support asset prices. Hallelujah!
So now which country’s rogue trader do we suppose is responsible for this new move?
Anyone who thinks these cuts are not dire measures against massive risk simply has his eyes wide shut – the risk has been deflationary, all along.
Anyone who thinks these cuts are not dire measures against massive risk simply has his eyes wide shut – the risk has been deflationary, all along.
What happened to Poole??? He voted against on Jan 22. I see no mention of him in this release. (Mishkin wasn’t present on the 22.) There is no mention of Fischer on the 22nd. Do they alternate? Fischer voted for no change today.
Karen,
IIRC Poole’s voting term up now.
Dow 14,000 ladies and gentleman and I don’t have a Phd in Economics.
I was at a loss as to the cause of recent volatility on the markets, so I did a little research and found a website that explains exactly what’s going on here – http://www.basherbusters.com. I signed up for free and was pleasantly surprised to get daily email reports with the most recent additions to the threshold securities list. They also have a bunch of tools on the site to help you make accurate trading decisions. Excellent site, I recommend that everyone goes to have a look, I found it quite useful.
sorry, i still don’t understand how poole’s term ended before the month was up. why was he voting on the 22nd? thanks in advance. i’ve tried to search this on my own but haven’t come up with anything at the fomc site so far.
The Fed gave us another 50bps cut as the fed funds futures had expected and a 50bps cut in the discount rate. Fisher dissented and didn’t want to cut at all. The language in the statement on the economy is similar to the Dec meeting but the inflation talk is extremely dovish by saying they expect “inflation to moderate in coming quarters.” There was NO talk on commodity inflation, particularly with energy, as they did in the last meeting. And, they left out “some inflation risks remain.” This dovishness is of course in clear contrast to comments from overseas central bankers. In a jab earlier today, ECB member Wellnick said the ECBs anti inflation stance leads to the strongest economy.
Indeed, they will cut to 0%. Ben is chasing the vacuum collapse with his debt machine. The dollar will be thrown like a bone to the advancing armies of deflation. The banks and mortgage industry must be saved at any cost. They are “too big to fail”. Life could never, ever, go on without them. Just ask our friends in Tokyo.
Ambac and MBIA are still hanging out there. would seem like the right needle in the balloon.
Nice. Now with all the garbage musings out of the way, time to make some money again …
They should have one channel where all the talking heads sit around and BS about their worthless opinions on the Super Bowl matchup, the possible Fed actions (and whether they were right or wrong), and which presidential candidate is likely to win each state (and whether those citizens are right or wrong).
Then, the rest of us can have a channel that just gives you the facts once events occur (e.g., Pats & Giants in SB, Fed cuts, Clinton and McCain win FL) and shows how all possible investments are reacting. Then we would have something valuable …
Here’s Mr. Obvious’s answer. NO.
The Fed has only had an explicit and stated Fed Funds rate since July 1990, and in that time frame there has only been one other time when the Fed has cut rates in successive weeks (during a recession naturally)
Week of Dec 5, 1990 7.5%
Week of Dec 12, 1990 7.25%
Week of Dec 12, 1990 7.0%
Obviously the quick nature of the Fed turning around after a rate cut is the same in both cases, but 125bp?? No way.
The biggest cut we’ve ever gotten since 1990 is 50bp, and then we had to wait awhile till we got another.
So we get a 50 basis point cut that everyone expected,
and the market ramps higher??????
WTF
So not only does Toto pull the curtain to expose the wizard
Toto starts pulling the levers also!!!!!
Would someone explain to me:
How is this a boon to the middle class?
How does this really help those who hold bad mortgage debt not marked to market?
As some noted if we are the new retro Japan then are we going to be the low end of the carry trade and if so what currency looks the best?
will we have SP 500 at 1450 tomorrow?
Hello Karen, sure they alternate in and out of the FOMC meeting, but Poole’s situation was wierder than normal.
He was scheduled to fall off the FOMC in 2008 but his term ends at the first FOMC meeting of the year…. So since there hadn’t been any FOMC meeting as yet in 2008, he was still a FOMC member for that emergency meeting and 75bp cut.
I am focusing on cheap equity prices and a 1.75% cut working it’s way through. Powerful catalyst.
William Ackman can’t be happy.
~~~
BR:
Why not? He has been short a stock for 2 years thats down 88% . . .
A little deeper history for Mr. Obvious:
http://michaelgracie.com/2008/01/22/rate-cuts-history-and-panic/
VIX has had a major intraday gapdown. If this rally fades, as I suspect it will as daily volume is not very good, look out below. Dow also making a nice head and shoulder.
The “inflation will moderate” is in the same league as “we believe in a strong dollar”.
Any chartists/technical(s) readers here?
What’s the “short the rally #s” on the indicies?
Thanks.
===========================================
By the way, sometimes a topic here, but CostCo has a 47″ lcd HDTV Vizio 1080p which looks really good. $1,399.
As much as I think Liesman should be be tied up and have an apple shoved in his mouth, and mounted and stuffed on the squawk box table.
The notion that the end of Gradualism, and Pushing on a string, fool in the shower. Could be done. and we are returning to more volker-esq. Federal Reserve. …
Well that can be a possible conclusion to draw….
Just a thought, before the litany of Dow 6k theorists come after me.
I hope we get another rate cut next week—lol
Steve Barry,
I’m trying to understand your comments (respectfully).
Does the fact that the fundamentals have recently changed color your technical analysis?
thank you for the information on poole. i know it was of little consequence at this point, but i like to keep the members straight in my head.
so, i think the fed is going to learn the hard way about real markets. anyone following the $tnx? the 30 is up, too. the BEST thing they could have done after the tactical embarrassment of Jan 22 was hold. now, soros will be born out. it truly is the end of the dollar era.
I’ve just got bad financial timing ever since I started working. First I accelerated away my 5% student loans because rates were 1%. Then I built my six month, emergency, bank-it-and-leave-it money market at 4% – even though the stock market was returning 12%. Then I set up my buy-and-hold index portfolio – right at the market apex. Now that I’m ready to save cash for a house, the go-go bubble is gone, rates are headed back to 2%, and inflation’s hitting 4%. I’m sorry guys. I think I’m the one who ruined the economy. If there’s any decoupling from the US economy, maybe it should be me. Or maybe I should sell myself as a one-man short or hedge.
BR – would love your thoughts on where we go from here…
We need another sector to take up leadership… The market cannot sustain a rally on the bounce of oversold financials.
Energy? IF crude goes back up then consumer is right where they started, screwed.
Tech? I don’t see much mutliple expansion here until consumer recovers.
MAterials? cyclical industry at a cyclical peak
Consumer? not doing so hot.
Emerging markets? see materials and energy above
I can’t get excited about any of them and sold all my XLF and XLY calls into the FOMC pop today.
I guess I need to fight the Fed and go back over to the dark side again.
Sarge6,
It sounds like you tried to make a series of rational decisions – but like a lot of people who try to “save” or “be smart” it does not work.
WELCOME to the Club!!!!!
You have to ask yourself, if the American economy can only stay afloat if interest rates are at 1%-2%, isn’t there something wrong with the basic economic fundamentals of the national economy ?
.
ha! more wasted ammo for equities…Got to love gold baby!
1/2 pt cut and the markets look like they may fall negative towards end here.
I guess this batch of heroin was on the weaker side!
400 now! Next stop, Dow 48,000!
Nice try Suge. Maybe on the next 50 bp cut. Or the next, lol.
Sorry buddy, couldn’t resist. ;)
Chief,
Dow has major overhead resistance here…maybe it could get to 12,750…if it fails there and breaks 12,000, it is going to 10000 pretty fast.
VJ – you have to ask yourself if the rest of the world is going to be willing to finance the US at 1-2% ;-)
Steve Barry,
I’m trying to understand your comments (respectfully).
Does the fact that the fundamentals have recently changed color your technical analysis?
______________________________________
I don’t know what you are trying to say really. No fundamental has changed recently. Housing has to fall 40% just to get to previous all-time highs and the market has to trade at one (or lower) times sales of 900 (or lower) per share. I said first thing on Jan 2 that this will be the worst calendar year in market history and nothing has changed. Are you saying the Fed cuts will stop this? I don’t THINK so.
pop!
NEW YORK, Jan 30 (Reuters) – Fitch Ratings on Wednesday cut its top “AAA” ratings on FGIC Corp’s bond insurance arm, saying the insurer does not have the capital required for a top rating.
Fitch cut FGIC’s “AAA” insurer financial strength rating by two notches to “AA.” It also cut parent company FGIC Corp’s long-term rating by three notches to “A” from “AA,” the third-highest investment grade.
Man you bulls are screwed.
Disclosure: Long QID
v,
I was high and drunk when I wrote that, just like Bernanke when he cut rates last week, so do I get a pass?
Suge aka “Bernanke’s homeboy”
The market had no chance…as I have said ad nauseum, when volume picks up this market tanks. Been this way for months. Since a Fed rate cut spikes volume, market had couldn’t rally.
Vermont Trader:
Exactly. Playing by the old school, safe and sound, classically prudent rules didn’t work. So now I’m gonna get mine.
I’m starting a hedge fund. For a fee, I’ll tell my investors what I’m about to do in my own financial life, and then they can just do the opposite. For example, if I ever decide to buy gold, you’ll know to short the hell out of it. Or if I don’t put money in something, you know it will boom. It’s like the ultimate insider trading – but perfectly legit. Who wants in at the ground floor? I’m setting up the PayPal right now.
What if Bernanke cuts rates again tomorrow by 50bps?
Suge
Now they downgrade after they inflate….
Lather….rinse……repeat
Nice “V” top…….could it be more obvious what went on today???
Ciao
MS
Steve, It seems like you have your story and you are sticking to it.
I don’t understand why the market has to sell @ 1x sales, or the real estate market has to correct 40%, but that’s what makes a market.
Richard Fisher, the only member of the FOMC voting to keep things the same, is the President of the Dallas Fed. He previously served as an assistant to the US Treasurer in the Carter Administration, helping to resolve the dollar crisis of 1978-79. Hmm…wonder if his experiences there animated his vote today?
He’s a first generation American, so I don’t think he’s related to Irving Fisher, the economist that first showed us how money and GDP are related through his famous equation, MV=PT, but I bet the Fed’s Fisher understands it. More Money (M) must be accompanied by lower Velocity (V) or it will show up as higher Prices (P) or more Transactions (T). If velocity stays the same, or doesn’t decrease by enough to offset the increased money, I wonder whether prices go up, or transactions, or both. I bet it’s a lot of the first and a little of the second, considering how little trust folks have in the transactions machinery these days.
I hope it takes awhile til this shot of inflation whiskey wears off…the hangover’s apt to be a bear (lame pun intended).
Suge,
Giants or Pats? Just wanna make sure I’m on the opposite side.
AMBAC/MBIA will collapse along with the economy. Start stockpiling grains, livestock and gold. There is still time. We’re at the beginning of an unprecedented collapse of all aspects of the economy which will lead to an apocalyptic failure of all social organization in the US. Biggs is, if anything, optimistic. The S&P500 is going to zero. I’m not kidding. Many in your families will die because they failed to act. Stockpile ammo and weapons that are capable of being converted to automatic fire.
Patriots all the way, I got shot in New York.
Suge aka “Bernanke’s homeboy”
The Fed is trying to solve a problem that it has no tools to remedy; rather Congress is the govrnment branch which should intervene to help selected indiviuals who would become homeless and selected states and cities overcome by housing bankruptcy, such as Michigan.
When the tech stock boom evaporated in 2000, individuals and investors were left to take their lumps. Companies like Enron went out of business, a few bad apples went to jail and lawsuits were filed, but that was about it.
Now the housing boom collapses and the Fed starts savings banks and investors from reaping the consequences, in part because now millions of people will possibly lose their homes.
In think a targeted housing relief program aimed at assisting low income homeowners should be started.
The financial players and firms who profitted from the mess should pay the penalty–bankruptcy and elimination.
Zed, what’s up. Did you forget your meds?
Feel like we got on the elevator and pushed a button, not knowing if we’re going up or down??
Sarge6 – you are zigging when you should be zagging.
When you are out of step with the markets just take a break.
The market will be there when u get back. In fact, it will be there after we are all dead and gone..
Stuart, the financial system is destroyed. Finished. Many hundreds of trillions in bad debts out there. Buy land in a remote area and prepare to defend it.
“Buy land in a remote area and prepare to defend it.” – Dwight Schrute
50 Bps and a Song….here’s the Song.
14 bottlers of CDOs on the wall,
14 bottlers of CDOs!
FBI takes one down,
13 bottlers of CDOs on the wall.
13 bottlers of CDOs on the wall,
13 bottlers of CDOs!
FBI takes one down,
12 bottlers of CDOs on the wall.
12 bottlers of CDOs on the wall,
12 bottlers of CDOs!
FBI takes one down,
11 bottlers of CDOs on the wall.
And so on…with gusto!
Bernanke got pwned.
CDO’s are the tiniest tip of the iceberg. The dollar will collapse. Gold, silver, foodstuffs, that’s where you need to be. Coal will skyrocket as a reliable energy source that can be stockpiled. Laugh it up if you want. The game is over and we are in new territory.
kk says: I don’t understand why the market has to sell @ 1x sales, or the real estate market has to correct 40%, but that’s what makes a market.
______________________________________
It doesn’t have to over the short-term…that is why we had the bubbles. But unless you throw out 120 years of data, it HAS to eventually. Here is the housing chart…see for yourself. Stocks usually have a high end range of 1 times sales…we started the year at 1.5 times, with sales set to fall.
120 years of housing
What’s with that tombstone planted in the DOW at 2pm today? Looks ominous.
I think Ben’s song has to be the Pixies “Debaser”.
Wow, I bought gold bullion as a hedge against inflation and an ultra-conservative asset. Had no idea I might need it later to get my family to Canada ;)
“The Committee expects inflation to moderate in coming quarters”
Isn’t this the same group that expected subprime not to impact the broader economy and then expected it to be contained?
I think they do too much expecting. In the process the dollar is going to get hammered by their apparent apathy towards it through rate cuts and more debt creation which will eventually be very inflationary.
So keep cutting Bennie and I’ll keep buying precious metals knowing that you can’t fix all the financial problems that way and that you are bought and paid for by special interests and its an election year.
Steve, I understand the bubble in real estate (I live in ground zero of that bubble), but I think the “bottom” of the housing correction will be based on many factors that might not jibe with the historical chart. Population shifts, demographics, interest rates and replacement costs are the demand drivers, and have changed considerably over time.
I’m not defending current residential real estate prices by any means, but another 40% down on AVERAGE seems a bit overdone. (condo market excluded)
Steve, I understand the bubble in real estate (I live in ground zero of that bubble), but I think the “bottom” of the housing correction will be based on many factors that might not jibe with the historical chart. Population shifts, demographics, interest rates and replacement costs are the demand drivers, and have changed considerably over time.
I’m not defending current residential real estate prices by any means, but another 40% down on AVERAGE seems a bit overdone. (condo market excluded)
kk:
Did the 100% rise in 10 years or so seem overdone?
Sorry for continuing to whine about inflation but the CRB index is about to close at its 2nd highest level on record today just as Bernanke said nothing about inflation other than he expects it to moderate. Refi’s are skyrocketing and that is very good for those who face ARM resets BUT the aggressiveness of the Fed and its inflationary implications is quietly sending the 10 yr bond yield today to its highest in 2 weeks. If this trend continues, the Fed will have diluted the impact of the cut in short term rates with a rise in inflation expectations and coincident rise in long rates which mortgage rates are priced off. The fine line the Fed walks.
Fed’s new paradigm… cheap money to fuel bubbles and bursts
IMO, 1 of 2 possibilities:
1) financial system in real trouble
2) Bernanke bullied by the White House like so many others (e.g. Whitman, Powell…)
NB: when FRB statement says “Financial markets remain under considerable stress…” what they really mean to say is “I, Ben Bernanke, am under a lot of stress. And I just cannot take this shit any longer. I couldnt tell you the last time the FRB cut rates 125 bps in one week because the walls are literally closing in and everyone’s talking about ME”.
I think Ben’s song has to be the Pixies “Debaser”.
Question: Why were there no pictures of homeless tramps riding dustbowl freight trains in the Japanese deflation of the 90s? ZIRP may not have performed a miracle but it certainly supported the Japanese economy through its rough times.
Are people seriously asking the Fed to increase rates from 5% to 6% like they did in 1929? (snicker).
Run for the hills… we are all going to die!! (just kidding)
McCain will solve all these problems with his financial expertise. (Yeah John, financial problems are those things that happen to people that do not marry a rich spouse).
Seriously, what a bunch of crap to hand the next administration- endless war, financial markets in “stress”, oil over $100, and has anyone looked at corn around $5. Ya gotta hand it to ol Bush. He knows how to out with a bang.
Uh, that same FED in 1930 dropped rates to 150bps by 1930……it sure didn’t work did it?
Thanks for the numbers, Steve.
Did the 100% rise in 10 years or so seem overdone?
Steve, 100% increase in ten years was not overdone, because in that time period conventional 30 year fixed rates fell 2%+ but the 100% over the next two years sure was crazy.
I’ve been watching the government reaction to the continued market volatility. It appears that the PPT has to get its’ shit together during the weekends and comes out shooting with both barrels. Hovever, when they get heavy sell offs after their pushes, they seem to be caught flat footed. I hope Bernake is counting his bullets. A hourd of Europeans, Chinese, Russians and Japanese are getting highly pissed at the flagrant robbery through currency devaluation of the dollar. Like Soros implied, they’re tired of the Orwellspeak. It’s reality time and those people have a lot of money.
kk,
When I studied accounting, one of the rules of thumb for buying a residence was that the monthly payment (including taxes and insurance) must not exceed 25% of your monthly NET, not gross. When ARMs distort the reality, people get suckered. The value of houses did not really go up; the interest rates went down. It’s an old trick I watched a bank in Texas perform in the 80s. They had a pack of condos they couldn’t sell. Did they lower the price on thes classy condos? Oh no, the bank dropped the interest rate to 5% in 1984! They sold the condos.
The point I’m trying to make is that we don’t make enough money in the US to have average housing costs above $150,000. The reality was speculative greed, not true value appreciation. Fight it all you want. As long as you make 4 times $500,000 a year, then you can afford a $500,000 house. Otherwise you are risking your financial future. Steve is right. Housing will drop like a rock.
Awesome… now inflation is going to burn up my student loans at the same rate it burns down my real wages.
I’ll be out of debt and destitut, but educated.
$40,000 Kia anyone?
I posted this yesterday, explaining the Bernanke has already told us many years before what he would do in these circumstances. From a 2002 speech:
“A healthy, well capitalized banking system and smoothly functioning capital markets are an important line of defense against deflationary shock.”
Compare that to today’s FOMC statment:
“Financial markets remain under considerable stress, and credit has tightened further for some businesses and households.”
Still think inflation is the worry?
“Still think inflation is the worry?”
We know what Bernanke is going to do as it is well publicized. So,I ask again has he done anything right so far? We are now and have been in a recession for at least two quarters. He can’t fix all the intricate financial problems the banks face with rate cuts alone. All he’s doing is postponing the inevitable and increasing the long term effects of inflation.
AGG,
Read my posts, I am not a real estate bull, far from it. I knew the housing mkt. was going down a dangerous road 3-4 years ago. I have owned my current home for a long period of time, so I am truly unaffected on a personal level with the meltdown. When asset prices are melting down however, I think it is important to start compiling some appraisal values with a built in margin of safety, and patiently wait for things to come in. Yeah things suck, we all know it, but they won’t suck forever. (of course if you read this blog you might think so!)
Pat,
It isn’t a question of right or wrong any longer – it is a question of necessity. The banking system cannot be allowed to collapse without total economic collapse.
Some people misunderstand my positions – I am only calling it based on currect conditions. This is our reality and we must deal with it. I hold no pro-Fed bias.
Inflation is the long-term enemey and the killer of the middle class.
The “wrong” we have is our debt-currency and dependence upon debt creation to survive.
kk,
I see your point. However, we clearly have too much supply for the demand. The demand is IMHO a function of wages (which are going down).
Of course these things pass. I own a home without a mortgage. I just hate to see appraisal amounts and wages rise on the sole basis of an inflated currency. This is Ponzi crap and someone like Ron Paul has already called Bernake on wiping out people’s savings through inflation.
Agg,
I hear you loud and clear about the current supply demand. Living in the southwest, I have experience with 35 years of boom & bust real estate cycles and with an economy that was totally levered to construction. Builders went bust, speculators gave back their land, and construction workers went unemployed. New players emerged from the ruble and the cycle started anew. The last trough lasted from 1989-2000, so there was some legitimate upside oapture before we overshot.
“The “wrong” we have is our debt-currency and dependence upon debt creation to survive.”
I agree with you Winston. What if you were several trillions of dollars in debt. What if you were anticipating millions of people retiring soon who paid into your system but whose money you had already spent. What if I told you that you could eliminate all of it by simply inflating your money supply to the point where its worthless. If you were the dishonest type, what would you do?
Pat,
As far as those off-balance sheet items, I expect we’ll see defaults rather than hyperinflation – hyperfinlation would reduce the republic to ruins.
Incredible! Now the Feds are aiding and abetting bank fraud and cover-up of bank losses.
Excerpts from Jan 30 Bloomberg article by Jonathan Weil.
“Just when it seemed as if the mortgage mess had hit a new low, now comes this: The Securities and Exchange Commission’s staff has granted the subprime-lending industry a huge exemption from the normal rules for off-balance- sheet accounting.
In effect, the move will let home lenders keep their balance sheets looking much smaller and less leveraged, even while the off-the-books loans they made get a makeover.”
http://www.bloomberg.com/apps/news?pid=20601039&sid=aPSScH5rRBLM&refer=home
This is a must read article, but please, lay down and take your blood pressure medication before reading the article. Your blood will boil.
Part of the problem of our indebtedness is the labor arbitrage, (U.S. corporations sold domestic labor (layoffs) and bought foreign labor (outsourcing). Americans, if lucky, got replacement jobs at 60-70 cents on the dollar of their former income. When the outsourced goods returned to the U.S. there was no reduction in former prices, thus American laborers had to go into debt to consume the imported good. With the resultant shrinkage of the middle class,while the fat cat is making obscene profits on the foreign labor.
Stretch. Contract. Push. Pull.
Thermodynamic laws rule.
True; heat flows to cold.