What does this chart mean?

The bank is allowed to lend out about 10 times what it has. It borrows money from the fed, so yes, it now owes that amount of money back to the fed, but this money is liquid and is immediately available for them to lend.

For example...say WaMu needed 10 billion dollars to get back to their reserve ratio. The fed lends them 11 billion dollars. They now owe 11 billion more, but are only required to carry 1.1 billion in liquid to cover this new obligation. They now have 9.9 billion dollars that they are free to lend to you or me to buy a house or car. They now are back to within their reserve requirements, and there is money injected into the system to keep interest rates low. (FYI, Before someone points this out...this is a very oversimplified example of a very complicated process)

Another reason why they did this...the money they were lent is not really required to be paid back. The fed decided that for collateral, they would accept bundled securities from the banks. So if the bank doesn't pay this back (they won't) then the fed will just take away some subprime mortgages (which the banks want to get rid of anyway)

See how it works? The banks win, the fed wins, you and I are bent over a table. Thank you sir may I have another?

What i'm trying to say is...this is nothing different that what has been happening in this country since any of us were born.

I am not a lab technician. I did that job years ago but have moved on since.

You're right, I don't work in economics...but I have had a personal interest in this subject for a few years and have been reading from a number of different sources and becoming self taught.

We are not out of the woods yet...there are certainly some more bad things to come. The commercial real estate market is a year or two from dropping out. The welfare state is growing and with social medicine, may grow by leaps and bounds soon. I'm not rallying with the Mad Money side, but i'm also not buying into the chicken little side either.

Point is, we're looking at a recession. We should have felt a deeper one around 2000-2005, but we printed and procrasinated and pushed off the pain until tomorrow. Tomorrow is happening, and the pain is now a little worse because we tried to cure the economy with the same mentality that got us where we were. We must feel some pain before we begin to recover. The early 1980's are the perfect example...we shedded a lot of jobs and slowed the machine to a crawl...but by the mid 1980's, we were in full blown recovery and good days were ahead.

You can make money investing in ANY market conditions. It's much easier during the boom times, but possible any time.

We are headed towards a recession...this is likely inevitable. The depression is certainly not inevitable...the only thing that will send us to a depression is a panic cycle. If people panic and run banks (many people here have advocated this) then banks will fall. If people begin to demand quick action from congress, they'll print more stimulus checks and the problems will last longer. If we begin to demand fast action from the President, he'll make some short sighted executive orders and only cause more problems. Please read some on the REAL causes of the great depression...it was not the excesses of the 1920's that caused it as most history books argue...but the stupid knee jerk reactions of government to do "something" to fix it that did. This is strongly advocated by Austrian economists, and I believe today the fundamentals are no different.

Best advice...have a little faith in capitalism...write your congressmen and tell him to stop interfering in markets...worry about your own money and try to make a buck in a sliding market...save some for a rainy day...and for god's sake...do some reading so you can educate the one's you love on how Keynesianism got us where we are today, and how taking a little lesson from Austrian theory may prevent us from ever having to go through this crap again. It wasn't a doomsday prophet who turned me on to this movement...it was a fireside chat with a very wise and trusted uncle who told me how great this country could be if we only valued freedom a little more.

Please, fellow patriots, this is our chance. Seize the day...the world will listen to us right now. It does no good to preach economic sanity and honesty in the boom years...right now is when we must educate ourselves and be able to explain in plain terms to people why we keep getting ourselves into this predicament.

The business cycle will flip once again, and we will recover from this (it may take a decade, who knows) but ask yourself this. Would you rather have spent the decade of recession and economic pain predicting the end of times...or would you rather have seized the opporitunity and educated your fellow Americans so that we can begin the long process of fixing the system so our grandchildren won't have to live through the boom/bust cycle.

Be positive when trying to explain what our views are...rather than dwell on finger pointing and predicting swan dives...dwell on how great things can be in this country again if we can dedicate ourselves to freedom. Spread the message of this movement...and the message should be what we can accomplish if we put our minds to it...not what will happen if we fail.

No, Fabio, those new emergency "loans" explain the ugly abnormality of that graph just fine ~ compliments of our treasonous Fed/Treasury/Congress. And we're just getting started...that line is going to the moon over time. Note the dates: 2007-12-01 to 2008-02-01: (new) term auction credit; 2008-03-01 forward: (new) primary dealer credit facility, other credit extensions, and term auction credit. I get a kick out of "other"! When things got dicey last Fall, the Fed opened the "Window" for the Primary Dealers (Investment Banks) to help prop them (liquidity; the over-night and inter-bank/credit markets had "froze"). Ever since the Depression, the act of going to the Fed's Window was considered a sign of weakness (wonder why?!), so the banks never asked/used. The times are a changing, though. Every time one of them says they're well capitalized, liquid, and dandy-fine, within a few days they're back borrowing at the Window, selling marked-down assets, puking out more equity shares/bonds and/or some such sordid thing. Then some idiots/shills call a bottom to our economic slide, the markets shoot up, insiders (and anyone with a brain) sell into the suckers' rally, reality sinks-in, and down we go again. And all the while, Bennie, Hank, Shrub, and McWar tell us/the world what a healthy, vibrant economy we have; the commie Dems think we're the richest Country in the world, so they come up with all kinds of ROW "causes" to fund with tax-payer $'s like it's monopoly money; and our idiot/ignorant Congress makes more rules/regs/mandates/committees trying to band-aid the horrid problems (or to look busy/concerned) to only cause even more harm...I could go on and on, but the chart says it all. They are treating symptoms, not the cause; and this financial-structure crisis is just under way. Debt, debt, debt EVERYWHERE; the reconciliation is upon us. It will never cease to boggle my mind how people can not comprehend what Dr. Paul is saying when he discusses finance/econ. On just that point alone, he should've been our Prez in '88. There's NO excuse, Americans can read the figures, look at the charts on-line or in the weekly financial papers. It's ALWAYS been there, but so many no longer know how to read or do a bit of arithmetic or even care. Pathetic. As States go further into the red, job losses and stealth taxes mount, and many are sitting out on the street ~ hungry, then perhaps people will ponder the concepts of self-reliance, arithmetic, and reading skills. Not to mention, HISTORY. Thanks for the discussion (my vent/rant!), Guys. ~Tarey