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Tuesday, January 20, 2009

What Will It Take to Get Banks Lending Again? (VIDEO)

"There are two levers for moving men: interest and fear." - Napoleon Bonaparte

That seems to be the big question. It seems I hear that question asked every time I turn around. Quite frankly, I know that "they" say there are no dumb questions ... but if ever there was a contender for 'dumb' questions? This one would be among the contestants.

What will it take to get banks lending again?

They've been given all of this money. We hear that fact stated in a variety of ways and with a slew of buzzwords. T.A.R.P. Money supply increases. M3. Deleveraging. Bailouts. Central Bank swaps. You name it. And then financial news stations begin bringing out economic concepts that haven't been heard from in 30 years. DOW Jones theory. TED spreads. Credit markets. Short term paper. It seems like every week your average citizen is besieged with more concepts and terms.

And commentators, or 'financial anchors' on television shows act as if those greedy banks would just take all of that money, and start lending to people? All of our problems would be over. We could return to our overpriced homes, and easy money. So why aren't they lending?

For one moment, let's put aside the fact that many of the loans that were made were based off the money the banks received from a Federal Funds rate that was far too low, for far too long.

And don't get me wrong, I think the banks have been led by some pretty moronic people. And at times, greedy. But is that the problem? Greed? Really? If they were greedy? Then why aren't they just taking all of that money, and doing exactly what they did before? Why is it, that new bubbles are not forming in commodities, or equities? If was as simple as 'bubble' creation, then we'd be out of this mess by now.

So what will it take to get banks lending again?

I discuss that in this vlog entry ...

(Video Included. If you're seeing this entry elsewhere and cannot see the Video? Click this link to view the entry ...)

It's quite simple. If you can't sell something, it's because there is no market for it. If the banks can't lend? It's because there is no market for what they've become accustomed to selling. Economics 101.

To paraphrase Jack London's 'Wolf Larsen', it's time to grow some legs and stand on them.

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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