Re: “Opening the discount window” & “the fundamentals are sound” = ????
On Aug 18, 2007, at 12:14 PM, B. wrote:
Okay, so what are “the fundamentals,” and when or why would they not be “sound”? Any examples of when the fundamentals weren’t sound? What are they — the fundamentals, that is?”
Fundamentals = what Wall Street calls the “real sector” (as opposed
to their own, unreal sector): employment, income, production, etc.
Weirdly, when they say this they act as if their business has no
connection to the real world. But it does - if there’s no credit, the
economy grinds to a halt. And by that I don’t mean speculative credit
- I mean what allows businesses to finance supplies and inventory,
and households to buy houses and cars. If a financial collapse leads
to a crisis of confidence, business does not invest and hire.
This could be a mostly financial crisis with no real world impact. Or
it could lead to the kind of generalized crunch I just described. We
don’t know yet.
Doug