We have come to find out we had it easy the last 30 years.  We thought Alan Greenspan "The Maestro" (former Federal Reserve Chairman) was a genius, but we found out the answer to every economic problem was to increase liquidity (print money), lower interest rates and have Congress decrease taxes.  Well, now our backs are against the wall since interest rates will eventually have to increase (since the fed funds rate is basically at 0%) and taxes are going up (we have a demographic and deficit issue), but the printing press will continue to print money (this will cause inflation which can be viewed as another tax).

Its time to begin to act like capitalist!  Remember when a bad idea would fail?  Or a "bad" borrower would have higher interest rates?  I thought a basic rule of capitalism was:  the riskier the borrower the lower the amount of loan and the higher the interest rate.  But in the news we are finding out the riskier the borrower the lower the interest rate and the higher the loan amount (Greece debt crisis and Bank of America forgiving partial mortgage balances of delinquent borrowers).  How can our economy function when we don't follow simple capitalist rules?

 

As Kopin Tan noted in his Barron's article on April 19, 2010 "No wonder Main Streets enthusiasm hasn't matched Wall Street's of late."  We are probably trying to figure out the new rules of capitalism.