One thought on “Bailout Nation

  1. You can’t make money loaning at 5% when inflation runs higher than 5%. That’s simple math. So until the Fed gets inflation under control, the credit markets won’t loosen up. (The offical inflation rate for 4th Qtr 2007 was 6.8%– and the “real” rate might have been high as 14%. Who’s going to risk lending money for the long term in that economic climate?) Plus, who’s the biggest borrower, competing with would-be homeowners for what funds are available? The Federal government.

    The Fed’s been ignoring inflation for two years now. And the bailout, in the absence of a tax increase (which ain’t gonna happen), will be paid for by deficit spending and/or inflating the money supply. That’s going to tighten the credit market even further, not loosen it.

    You’re absolutely right: reality will intrude.

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