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Sep 26, 2008 -- Why the credit markets have frozen up
The financial turmoil has led to a lack of trust between financial organizations and freezing up of the credit markets. As with most things in life, the best way to appreciate the current situation is through the lens of history.
In the 1800s, there was no central money system. Banks printed their own money from state to state and people had to decide if they trusted money from a given bank.
Well, that's where Wall Street is today. Banks don't trust the IOUs they hold from other banks. In all the layers of the commercial paper market, nobody trusts anybody else's paper. This is a key part of the freezing up of the credit market that Bush keeps talking about.
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What others are saying
Let the Hangover Begin.
Let's stop using CREDIT to further our debts. Unfortunately, the party is OVER. America. Try to get on a cash-only budget and let the horrible hangover take its course.
Trust is the issue!
You can't legislate trust, so the $700B will do nothing!
Financial
Hey Clark: Thanks for your article. I read with interest and agree with you 100%. I can remember 35 years ago when I emigrated to this country, I was amazed on how much credit was available. I just could not fall for it all. I still bought and paid for what I could with cash. When I started using credit cards, I only spent as much as I could repay. My friends laughed at me. I have lived that way all these years and now I can ask my friend -- "Who is laughing now?" Not that this situation is a laughing matter. Thanks again Clark. I miss hearing you in Washington, DC. Will you be back on the air soon? I hope so.
