[escapee]

There is nothing worry about (sarcasm), The Fed will rescue all failing banks with more free credits dumped from the sky.

The Austrian thought of economy
The War on Recession - Llewellyn H. Rockwell, Jr. - Mises Institute

So it is with the Fed. It sees stocks falling, credit markets under pressure, unemployment rising, investment falling. But rather than conclude that all these factors represent a bubble, it has the opposite response: keep the bubble inflated at all costs!

It's time that we question the very foundations of this war on recession. The recession is a regrettable but inevitable backlash against a boom that was not justified by the fundamentals.

That last phrase is the critical thing. I am not saying that the recession is the price we pay for economic growth. Boom times are fabulous times, provided that they are rooted in sound fundamentals. And what are those? Essentially it is this: the timeframe of investment must match the timeframe of society at large. If people are long-term oriented and saving money, resources become available for investment in the future. When production is completed, there are consumers to buy. But if no one is saving money and there is no sound store of capital, there are no resources to invest — unless, of course, the Fed creates that money. The money the Fed creates is wholly illusory, a fiction of investors' imaginations. It will vanish when the economy wakes up to reality.

FSU Editorial: "How Debt Money Goes Broke" by Steven Lachance 12/12/2005

The US is now in a fundamentally different position than it was in 1930 or Japan was in 1990. Aside from a dearth of domestic savings, its vulnerability is compounded by a current account deficit. There is no buffer and no margin for error. Thus, when interest charges, now $2 trillion per year and accelerating, overtake annual debt growth, now $3 trillion and decelerating, liquidation will immediately trigger cascading cross-defaults. Without domestic savings to mobilize, the Fed cannot facilitate the expansion of government debt to fill the breach and simultaneously hold down interest rates. It cannot win the battle to keep debt growth greater than interest charges, the precondition for the viability of a debt-based monetary system. Once started, cascading cross-defaults consume all debt within an economy. The Fed has only two options: institute a new monetary system with a new currency or return monetary authority to the market and shut down.