The national “bank holiday” that ushered in the New Deal in 1933 locked up the public’s cash for four days. The crisis that hit last month at the Reserve Fund, the nation’s oldest money market fund, has frozen hundreds of thousands of customer accounts for more than six weeks — with no sure end in sight.And on the subject of money.... The feds just cut rates again:
At least 400,000 people, and perhaps as many as a million, can’t get access to their savings, a problem that has quietly persisted in spite of widely publicized federal efforts to restore confidence in money-fund investments.
Some of these customers — who, like most Americans, assumed their money funds were as safe and accessible as bank accounts — are getting desperate.
NEW YORK (CNNMoney.com) -- The Federal Reserve cut a key short-term interest rate by a half-percentage point Wednesday and expressed continued worries about the damage being done to the economy by the ongoing crisis in the financial and credit markets.Is anyone in charge thinking about a liquidity trap?:
The rate cut put the central bank's federal funds rate at 1%. That matched the lowest level for this overnight bank lending rate ever -- the last time it was at 1% was from June 2003 to June 2004.
Investors had been expecting a half-point cut and some were betting that the Fed would even cut rates by three-quarters of a point to 0.75%.
The Dow Jones industrial average, which had been higher ahead of the Fed's decision, turned lower shortly after the announcement.
Here’s why these events are distressing: When the Fed douses the monetary system with cash but banks hoard it, monetary policy no longer works and the economy starts to crash. This is called a “liquidity trap” and it occurs when interest rates are at or close to 0 percent and monetary policy is no longer effective. Newly minted money is injected into the banking system but trapped by financial institutions that are paralyzed by fear. When banks don’t recycle their money through normal lending activity, it doesn’t matter how much the Fed increases the money supply. Monetary policy just won’t work. Failing monetary policy usually means that we are going to have a recession, or worse.Use plastic mayonnaise lids on the jars, the metal ones rust.
This is what happened at the beginning of the Great Depression and during the Japanese banking crisis of the late 1990s. In both cases, economic activity slowed dramatically and deflation occurred. No matter how hard the central bankers tried to pump money into the economy, it wouldn’t work.
The Chinese freighter arrived in South Africa last week, and human rights groups and others said they feared the mortar grenades and bullets onboard could be used by President Robert Mugabe's regime to clamp down on its opposition.How dare China horn in on our weapons deals!
A South African group persuaded a judge to bar the weapons from transiting through the country to landlocked Zimbabwe. and the An Yue Jiang then sailed away from South Africa. Private groups and government officials in Mozambique, Angola and Namibia also objected to the weapons, though Namibia said the ship could refuel there if necessary.
[snip]In Washington, the State Department said it was pleased by Tuesday's news from China.
"Right now clearly is not the time that we would want to see anyone putting additional weapons or additional material into this system when the situation is so unsettled and when we have seen real and visible instances of abuses committed by the security forces," deputy spokesman Tom Casey told reporters.
Zimbabwe's government has refused to publish the results of the presidential election held more than three weeks ago, and the opposition says that is part of a ploy to steal the vote. There are reports of increasing violence against the opposition.
China is one of Zimbabwe's main trade partners and allies, and there is no international arms embargo against Zimbabwe. But China's relationship with Mugabe is often pointed to as an example of its willingness to deal with authoritarian regimes in order to secure commodities and markets in Africa.
Although China's global weapons exports are considered tiny in dollar terms, especially compared to the United States, Beijing is a principle exporter of cheap, simple small arms blamed for fueling violence in Sudan and other parts of Africa.
The United States maintained its role as the leading supplier of weapons to the developing world in 2006, followed by Russia and Britain, according to a Congressional study. Pakistan, India and Saudi Arabia were the top buyers.I mean... we have the right and the need to arm people all over the world with the latest weapons! We are the self-declared policeman of the world and we must go fight and conquer those who ... we .. have armed... ah...The global weapons market is highly competitive, with manufacturing countries seeking both to increase profits and to expand political influence through weapons sales to developing nations that reached nearly $28.8 billion in 2006.
