Jim Rogers says: “(Geithner) … has been dead wrong about everything for 15 years in a row … This (the rescue plan) is not going to solve the problem, it’s going to make it worse.”
Geithner is going to implement the TALF program for a trillion or so. The banks won’t lend or can’t lend to a host of borrowers in the volume that the government wants, so the central bank will do it instead, thereby jacking up the monetary base by immense amounts. The Fed will make loans to things like hedge funds so that they can then buy commercial mortgage loans, auto loans, student loans, etc.
The only difference between this and what the Reichsbank did is that the latter discounted commercial paper (which the FED already is doing) and not long-term paper. Quoting Bresciani-Turroni:
“But in the summer of 1922 the Reichsbank began to supply directly to commerce and industry the financial means, the need of which, in that period of credit crisis, was urgently felt. To mitigate this crisis the Reichsbank insistently counselled the business classes to have recourse to the creation of commercial bills, which it declared itself ready to discount at a much lower rate than the rate of the depreciation of the mark, and even than the rates charged by private banks.”
Bernanke, the FED Board, and Geithner do not know this history. To the extent they know it, they don’t believe it. They believe that this time the consequences will be different.
