Just as the Senate is ready to take up the Government Discretionary Expansion Act of 2009, i.e., the Debt Bill, comes evidence that the credit markets are starting to work again.
The Wall Street Journal has reported in recent days that
- the commercial paper market - short-term financing for corporations that they need to continue operations - is recovering.
- the corporate debt market saw a record issuance in January, although some of that was a result of government-guaranteed debt
- junk debt - the riskiest corporate debt out there - saw its best month since July of last year
All of this is happening at the same time that long-term interest rates on government debt are rising, making the so-called stimulus bill even more expensive, and sovereign debt all over the world is starting to look riskier.
The economy doesn't function primarily on government debt, and God willing, it never will. It functions on private credit. While it's a relief that incoming tax-dodger Geithner is partial to retaining a private banking system - as though government banks have ever been more reliable than private institutions - we need to remember that private finance is where the action is. And right now, it's showing signs of life. In other words, the monetary stimulus and stabilization seems to have done its job, and the fiscal stimulus will only make things worse.
Which shouldn't be a surprise. While Central-Planner-In-Chief Obama may have decreed that banks oughtn't be making profits right now, but why on earth, when the economy tanks, do policy-makers just seem to forget that businessmen, including bankers, want to make money?
