stahleyp Posted March 22, 2020 Share Posted March 22, 2020 My line of reasoning is like this: If the bailout of LTCM never happened, we would have never had the dotcom boom (and bust). The Feds lowered rates to help with liquidity which drove valuations. If the dot com bust never happened, we wouldn't have had the housing crisis (since rates wouldn't have dropped due to the dotcom recession). If we didn't have the housing crisis, rates wouldn't have dropped so low which allowed companies to borrow so much debt to buy back stock. If we didn't have so much debt, we wouldn't be on the verge of a huge, huge meltdown. Companies would remember to have a rainy day fund and wouldn't expect bailouts. So, if the Fed would have just kept rates stable and let the economy hit a recession (and probably pretty small) in 1998, we wouldn't be in the situation we're in right now...and would have probably avoided 2 other very large economic hits. Link to comment Share on other sites More sharing options...
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