Well it's been a little while since our last update on the money rollercoaster that has included everything from the world's biggest bailout, to Black Sunday, to volatility that has had the stock market going up and down more than a yo-yo on a trampoline. Just yesterday, the Dow flip-flopped 75 times, which is more than your standard politician.  In other words, it's been two weeks since the bailout passed and stock markets worldwide are still flailing around like a cat in midair. Credit remains frozen, investor confidence is shaky as a rope bridge in an earthquake, and consumers have stopped spending. Confidence is down because of fears of a recession. Added to this is the fact that even though the bailout was supposed to act as a financial super-laxative and loosen up credit and lending, financial institutions still aren't granting credit. In fact, the reserves (unused cash that financial institutions deposit with the Federal Reserve when they aren't loaning it) at the Federal Reserve have reached a historic high of $265 billion--money isn't even being lent between institutions.  Institutions aren't lending, so businesses are having a hard time doing business. Frozen credit makes people worried about a recession and instability, so they aren't spending, which further aggravates the economic problems, because the U.S. economy is driven by consumerism. It's a spiral in which  economist Marc Touati said, "Economic reason has been tied up and shut in the cellar." But don't panic.

The market is in the process of correcting itself from the excesses and abuses of the past years. Our job is to learn our lesson--don't get greedy--so that we don't have the unfortunate experience of becoming just another footnote in history of a generation that repeated the mistakes of the previous one. Don't forget to drop me a comment and let me know what you think about the money madness, and how you are dealing with it.

--Jens

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