posted on Jan, 14 2011 @ 08:54 PM
reply to post by SamTGonzalez
I wouldn't worry.
What you are witnessing is "the game". Here is what is happening.
While everyone is de-leveraging, the FR comes up with a plan to "float" the economy until we can right the ship. Here is what happens. Banks,
countries, institutions, common people all got slapped on the wrist. Now instead of being able to get xxx amount of leverage one can only now get .85
* (xxx). Some more, some less.
What happened realistically was that all of these entities and individuals were leveraged up to their eyeballs. If you are familiar with banking to
begin with this is all much easier to understand. Leverage is a doubled edged sword. It can be a great thing in good times. But it only takes a
sharp deviation from the mean to topple you all at once.
It helps very much to understand fat tail probability distributions to be able to visualize these concepts. When these 7-10 sigma events (deviations
from the mean) occur, well god can only save you then.
These events do not happen often, but when they do they are of course devastating. Regardless, back to my point. Once the FR comes to the conclusion
that we are not going to head into a period of deflation
(yes, that is what would have happened if the FR did not step in) then they will once
again raise rates and remove liquidity from the marketplace. They are also creating other happenings as well that "take care of themselves".
For instance when equity prices rise people feel more inclined to put money back into the economy. To truly understand all of this you really have to
be well educated. There could be several books written on these subjects and it would be impossible to competently describe these concepts all in one