WecoulddismissallthisasItalyjustbeing,well,Italy。

Butgovernmentinterventionisalltheragethesedays–eveninthehomeofcapitalism。

TheFederalReservethisweekcutinterestratesaslowastheycango。

Infact,theUScentralbankskeyratehasbeeneffectivelyzeroforawhilenow,sothemovewaslittlemorethansymbolic。

ButanyonewhohadanydoubtsbeforenowknowsthattheFedwillprintmoneytoanunlimitedextentuntilitstartstoseetheeconomyexpanding,asformerStLouisFedpresidentWilliamPooleputit。

TheFedsalreadyboughtmortgagebondstodrivetheinterestrateonmortgageslower。

ItmaybuyUSTreasuriesintheNewYear,tocutlong-terminterestrates,andstandsreadytoextendcredittosmallbusinessesandhouseholds,reportsTheDailyTelegraph。

ButhowwilltheFedchoosewhodeservessupport?

TheproblemisthatthecreditbubbleofrecentyearshasleftAmericawithtoomanybusinessesprovidingservicesthecountrynolongerneeds。

DoesAmericaneedmorehouses?

No。

Moreshops?

No。

Morecars?

No。

Whatitreallyneedsismoresavings;thatmeanssomeofthesefirmshavetogotothewallasconsumerscutback。

Throwingmoremoneyattheproblemwontmakeitgoaway–itcouldwellmakeitworse。

Afterall,whentheItaliangovernmentstopsbuyingcheese,therewillstillbetoomanycheesemakers。

AndJapanssixyearsofzero-interestratesdidntstoptheeconomyfromfallingintorecessionthisyear。

IftheFedgetsinthewayofthecreativedestructionprocess,itmaybeaverylongtimeindeedbeforetheAmericaneconomycancomeofflifesupport。

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