If zero-percent financing were a panacea, Detroit would be booming. Free money hasn’t helped the automakers. But maybe, just maybe it’ll save the economy.
My favorite quotes these days are from economists crowing about how the Fed is using every weapon at its disposal to prop up the economy. Trouble is, the Fed is kind of like Poland’s cavalry going up against Nazi tanks in September 1939.
We know how well that turned out for the Poles. Not so good for the Nazis in the long run, either. But they managed to do a hell of a lot of damage in a few short years before anyone figured out how to overpower them.
4 comments
Comments feed for this article
December 17, 2008 at 12:35 pm
Jacek
In WWII Poles charge against tanks in 2 situations:
1. reconnaissance charge
2. escape from encirclement
It NEVER was open main battle.
Any additional parables to the actions of FED?
December 17, 2008 at 12:40 pm
joelb28
“Like” connotes a simile, not a parable.
December 18, 2008 at 1:43 am
bevans623
Is Jacek trying to defend the Fed? Wow.
Here’s another Fed parable for you: The Fed’s current actions are like giving whiskey to a drunk to get him to sober up.
Like I’ve been saying, you can encourage borrowing all you want, but in our current crisis, we need to encourage LENDING. To encourage lending, you need to raise interest rates so the lenders are getting an adequate return on their risk. Lowering rates encourages banks to hoard money. It might make it more attractive to borrow, but when you’re already up to your eyeballs in debt, you aren’t going to go out and take out another loan to buy a car.
December 18, 2008 at 9:11 am
joelb28
I think Jacek was defending the honor of the WW2-era Polish army, which is commendable. But yes, I agree with you. Low interest rates do end up hurting banks because it squeezes the profit they can make on loans.
Meanwhile, Americans haven’t needed much incentive to borrow over the last 20 years. Credit cards have ridiculously high rates and people still carry balances anyway. Go figure.