Big Picture: A Different Day
As 2009 progresses, the impact of the steps taken by the old and new administrations to prop up the economy, along with the final tallies of holiday sales, are beginning to hit the industry.
As the past year came into its final economic quarter, the U.S. government sought to provide some impetus to goad banks into the lending game, using traditional methods that had worked in the past to accomplish its goals. In normal times, the adjustment of interest rate levels provided a throttle to the economy—at times speeding it up, at other times slowing it down. Traditionally, interest rates were raised and lowered as a means of controlling inflationary tendencies, which investors then used to set their market investment strategies.
But unlike the past, the lowering of interest rate levels to unprecedented lows has had little effect, if any. The market has slumped anemically along, fluctuating within a few hundred points range. On top of that, bank lending has remained tightly constrained and consumer credit has remained nearly frozen. The result of the interest-rate drop did not have the tried and true results of the past. Given the current climate, scant other results could have been expected. The question remains: what happened and why did results diverge from recent past experiences?