It is rather depressing to watch all attempts at bailing out the beleaguered financial system fail miserably. After four large central banks cut rates by 0.5% in an unprecedented co-ordinated move today, overnight commercial paper rose by 0.56% to 3.5%, indicating that markets still haven't unlocked themselves and that it'll take a lot more than what's been done in order to restore liquidity and confidence in the markets. Given how much has been thrown at this problem which, to my mind, looks more and more like a big black hole every day, I'm not sure how much money central banks can continue to pump into the system.
Markets are irrational, just like women, I told a friend. Part of me feels that the media has played a major part in causing this run on the financial system as a whole. I'm not sure whether that's fair of me to say that, but I would say that if I didn't have the financial knowledge I have, I would most likely believe everything the press has been saying. I'd probably be keeping my money in a metal box hidden beneath the floorboards or something like that.
I'm definitely not saying banks aren't too blame. Of course they are. Banks make bundles of money coming up with complicated structures which are in no way tangible and yet worth billions of dollars. Unfortunately, new innovations in the financial sector cannot be tested in the way cosmetics and drugs can be. If something fails, it'll fail spectacularly. No two ways about it.
Right now, I can't figure out if governments needed to have responded a lot earlier than this, or if they should have done nothing at all, though I do note that for politicians and everyone else, it is much much better to be seen trying to do something, as opposed to doing nothing, even if the latter would have resulted in a more favourable outcome.