Economic Article Analysis Essay Example | Topics and Well Written Essays - 500 words

Economic Article synopsis - Essay ExampleBanks, chastened by the recent credit disaster due to the subprime mortgage loan debacle, pretend refused to take more risks by way of lending. Seeing that the stimulus package did not work as expected, both Treasury and the Fed decided to inject funds directly -- from the helicopter, so to speak -- into the saving by buying distressed assets in order to pump more money into the economy to prickle growth. This took the form of programs named Term Auction Lending Facility, Term Securities Lending Facility, and Asset Backed Paper bills Market Mutual Fund Lending Facility. This buyback program had recently reached $2.2 trillion from $950 billion populate September 2008. Such an approach sought to stave off a catastrophic downturn although almost observers think that the recession is already running, the worst since the early 1980s.From the economists point of view the attempt of the US government activity to intervene is based on what has been learned from the Great Depression of the 1930s when the so-called invisible hand. was lay down no longer reliable. A British economist, John Maynard Keynes, proposed that the government should take direct action to urinate the economy, by way of infusing liquidity through direct spending to stimulate consumption and industrial activity. The guessing of cash could be made through the banking system, through low interest rates, or through pecuniary policy via a budget deficit, or by a combination of both monetary and monetary policy. First, the Fed offers low discount rate to the banks, and the latter should be able to to lend the money to borrowers at just a slightly higher interest to account for their income derived from the spreads In the present situation, however, the banks are not extending credit. Consequently, the Fed had to take direct action by purchasing distressed assets. When the economy recovers as astray believed it will, starting --