The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent. Now if that seems low to you that would be because it is. If that seems “too low” to you, you would once again be right…it is.

Basically, we are running out of room to lower rates. We are continuing to try and find a quick fix to what needs to be a correction.

Capitalism is like survival of the fittest. Or, at the very least natural selection. Weak animals disappear, stronger ones survive. Companies are the same way. Those that are well run survive; those that fall apart are supposed to fail (and let the next company step up to the plate). 

That is the way it has always been…until now. 

Now we are trying to manipulate a free market. We want the market to function by itself (free trade, etc) but now we are trying to “help” the ones that should fail. So what happens when you do this?

1. The “saved” company that should have failed will most likely still fail – you will have just wasted your money. Unless the company undergoes radical changes (which is typically unlikely) it will not survive – it is merely on life support for a while. Unfortunately, those funds supplying that life support come at an expensive price to the taxpayers. 

2. The “next in line” companies do not get their shot. Matter of fact, since they are not being helped in a newly manipulated market, they may fail. 

I still believe that we should not have done the bailouts. I think it would have been a difficult and painful decision to not bailout some companies, but it is going to hurt even more when we can’t keep feeding them money and we are a trillion dollars into it. 

If you truly believe in capitalism, you have to let it correct itself. 

***Be a Part of the Conversation and ADD A COMMENT***

So where does the Godfather and The Slow Bleed stand on all of this? 

Well, neither party is specifically to blame. That is not to say neither are guilty, frankly, we all are. Some of us saw it coming and people that could have acted to avoid it didn’t. 
Here is my top 5 list of what went wrong… 

1. Bush administration failed to provide needed oversight. Argue as much as you want about who controlled the House or the Senate, the buck stops at the Presidency. We want to hold all CEO’s accountable for their companies? It starts at the top here as well. 

2. Mark-to-Market accounting. An obscure accounting rule allowing companies to book revenue that has not been realized assuming it will be taken to market at a given price. That works great unless the market changes by the time you get there. 

3. Home buyers who purchased homes they could not afford. Buyers that relied on the hopes the market would go up and they could sell for a profit. If you couldn’t afford the normal payments (amortized) an interest-only loan was not the answer. 

4. Wall Street Companies. They know better than anyone the market will go up and down. CEO’s acted like kids in candy store and forgot the basic rules of gravity. Personal greed outweighed good business judgment. 

5. The aggressive lowering of rates. After the dot-com crash the Federal Reserve aggressively lowered rates. Too aggressively and for too long. At some point the market got to control the rate drop instead of the Federal Reserve. 

I could go on and on but wanted to limit it to my top five. Anything you want to add to the list?

***Be a Part of the Conversation and ADD A COMMENT***

Taking inspiration from Renaissance Guy I decided to make my own list of things the government can buy from me. Obviously they are in a big spending mood lately, with the bailout and the new fiscal year budget, so some of my stuff must be in high demand. 

Here is what I am willing to sell to the Government during this bailout… 

• Two broken PC Computers 

• One-half box of Lucky Charms 

• 210 Data CD’s (don’t know what is on them) 

• 43 VHS Tapes (including Howard the Duck) 

• Original Sony Walkman (broken) 

• One-half bar of Toblerone 

• One Franklin Mint Plate (faded) 

• 3 Dozen Golf Balls 

• One-Half Box of Lego’s 

• One Black Jump Suit (please don’t ask) 

• 2 packs of gum(?) 

• One Scooby Do Lunch Box (should get a good price for this) 

• Something in the Tupperware in the Fridge 

• Two Puzzles (pieces missing) 

• Two Dilbert Calendars 

• One Paintball Gun 

• Six Old Cell Phones 

• Three “Idiots Guide to…” Books (you might need these in Washington).

***Be a Part of the Conversation and ADD A COMMENT***