Shock Therapy on Wall Street: What’s Next?

The debt crisis is more significant than most people think, and is causing panic in high places. Tools

Institutions and human psychology lead financial markets to bounce back and forth between exuberant greed and catatonic fear. Times of fear generate high unemployment. Times of greed are likely to be times of destabilizing inflation.
- Economist Brad DeLong

On September 19, the US stock market received a gift from the Federal Reserve Bank in the form of a half percent interest rate cut, twice the amount most analysts expected. The move followed another week in which the debt crisis rolled over financial institutions worldwide and people’s lives like an out of control freight train.

Why?

There is panic in high places. They know this crisis is far more serious than most of us realize, and that the interest rate cut will not address the subprime problem or bring relief to the millions facing foreclosures and a tighter economic noose around their necks.

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