When Disasters Become Commonplace

The amazing thing is that nothing happened today, yet the Fed needed to pump nearly as much money into the financial system as it did right after the worst terrorist attacks this country has ever seen. This is a startling commentary on the current state of the US economy. As I have observed in previous articles, our financial system is coming more and more to resemble a drug addict in the last stages before hitting rock-bottom – i.e. the stage at which ever increasing amounts of drugs are required just to avert a total collapse. The fact that a cash infusion of similar size to what was required in the immediate aftermath of our country’s greatest disaster is now a commonplace, daily occurrence indicates just how far gone we really are.

The image that keeps coming to mind for me is from the Road Runner cartoons of my childhood, in which Wily Coyote runs off the edge of a cliff but doesn’t actually fall until he looks down and notices where he’s at. In a similar manner, the US financial markets continue to chug along with only minor hiccups, still safe in blissful ignorance of the fact that the ground beneath its feet has long since disappeared.

Yesterday the Fed cut rates yet again, and the market predictably staged an anemic rally, only to be followed today by a sharp sell-off. One thing is certain in financial matters – no matter how hard you try to ignore the cold, hard facts, debts don’t just go away (in fact, they grow), and you can’t get something for nothing. Try as we might to ignore these realities, there comes a point at which any remedial measures produce less and less positive results.