Comments on: The Fed gets ready to try another thing it's never tried before

By: Barbara Kiviat

Barbara Kiviat — Tue, 07 Oct 2008 19:23:22 +0000

@Nathan W.: Justin, if I may... There might be more risk at the edges (looks like we're heading into a recession, and you know what happens to companies in recessions), but the much bigger reason for the commercial-paper contraction is investors' aversion to all but the safest of investments. For example, money market mutual funds are huge buyers of commercial paper, and investors in money markets, especially the institutional ones, have either been 1) fleeing altogether, or 2) switching from funds that buy commercial paper to those that only buy Treasuries. Right after the Fed announced its program this morning, the price of Treasuries fell, indicating that people are already willing to stray from the safest-of-the-safe. It's yet another case of fear having overridden fundamentals—and the government stepping in to try to bolster confidence.

By: twiglyfigly

twiglyfigly — Tue, 07 Oct 2008 19:03:31 +0000

This is all part of an elaborate well calculated and executed pyramid scheme. Nothing these people are doing, suggesting or implementing can be trusted because they just stole trillions of dollars. Their plan is not to make things better or fix things because they are gaining by things being broken, something they purposfully created.

By: Curmudgeon

Curmudgeon — Tue, 07 Oct 2008 18:45:38 +0000

I'm guessing that the markets for commercial paper are drying up because banks need to conserve cash. Every loan (commercial paper, credit cards, revolving credit, home equity, you name it) takes money away from what they may find themselves suddenly needing to offset a security that has either dropped significantly in value or there is no way to value it at the moment.

Also, I think there is just a general swing toward overcaution, in reaction to the years of little or no caution.

By: Nathan W.

Nathan W. — Tue, 07 Oct 2008 18:01:38 +0000

"The commercial paper market is generally pretty low risk"

If that were true, why is it shrinking rapidly? Someone (being banks and investment firms) must think there is more risk there than before.

By: Walt Culver

Walt Culver — Tue, 07 Oct 2008 17:11:35 +0000

Well we tried the Bush experiment of tax cuts/tax cuts, and deregulation and those didn't work. Shouldn't run that experiment again.

Might as well try this experiment, but THIS time watch it! Any high school lab class knows enough to watch the test tube closely.

By: Joe Bftsplk

Joe Bftsplk — Tue, 07 Oct 2008 15:18:26 +0000

Well put, Curmudgeon, well put!

By: Curmudgeon

Curmudgeon — Tue, 07 Oct 2008 14:24:06 +0000

Central planning . . . but without the planning part.

By: Brandon

Brandon — Tue, 07 Oct 2008 14:11:12 +0000

Seems too little too late for me. The FED realized too late the mess we are in. What it comes down to is that THE ECONOMY IS MORE POWERFUL THAN THE GOVERNMENT. Yesterday the market dropped below 10,000 for the first time in years. These are some of the reasons I found why this is happening http://www.gotoguy.com/?p=402.

Good luck to everyone and I hope you have CASH on hand.