In the months that have followed after Bear Stearns was rescued from complete failure we see that it’s far from over. Bear Stearns was just the beginning to realization that we have over extended ourselves in the financial industry.
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The government has stepped in to save Bear Stearns, Fannie Mae, Freddie Mac and lastly AIG, but where will it end (other than Lehman Brothers)? This past week the Treasury dept., Federal Reserve and the SEC along with the cooperation of foreign governments have gotten together to see what is to come of the world economy. Unfortunately what needs to be done has not really been addressed.
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That being said lets take a look at the real issue. We as a nation are over extending ourselves with borrowing too much money. never mind the fact that it’s also the problem in the corporate world as well. Leveraging money is the way for business’ to have their money work for them and to go further, but it’s gotten to the point that it seems to be the only thing that they (as well as we) know what to do. The government wanted to stimulate the economy by giving the American people a tax rebate check and to do that they needed to borrow the money from China. In the long run it didn’t work out that because many taxpayers paid off debt or put the money in savings. It’s a shame, they’re going to use the taxpayer’s money to pay back the debt of borrowing money to give to the taxpayers, it’s a paradox.
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There is only so much wealth in the country and the rest of it is leverage of that money. Yes the gevernment can print more, but there’s only so much actual value in this world. The wealth does grow over time, but not as fast as we want it to or as quick as we borrow it.
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There are going to be more bank failures, how many, who knows. What I will say is that this little two day rally that the markets had this past week will be short lived. I will always follow the markets and learn what I can, but I’m going to take profits into any rally and take a break from this roller-coaster ride.
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