Large and small companies across the globe rely on access to money markets to finance their daily operations, including inventories, and payrolls.  Lenders routinely make loans to these companies, and to each other, to make it all happen.  When lenders have confidence in these markets, and investors have confidence in this system, we have a functioning marketplace that, for the most part, is sustained by competition.  When confidence in this system is shattered, however, like it has been recently, credit becomes expensive and scarce to all parties, and small and large companies alike can choke to death waiting for the short-term capital it needs to fund its long-term success. This directly affects you and your family.  It means a slower economy.  It means more lay-offs and less new job creation, which often means lower home values.  It also fuels volatility in the financial markets that, as we've seen, can wreak havoc on your savings, retirement, and other investment accounts.  

 

It is estimated that some $70 trillion in total global investment capital is available, which would be great news if our financial system were functioning with confidence--and that's what the Rescue Bill is basically about.  Like it or not, the US Government has been given unprecedented power to invest $700 billion in our financial systems in two ways.  First, as much as $250 billion to purchase stock in US banks, providing the banks with badly needed money.  Second, through the purchase of certain assets to help stimulate more liquidity in the credit market.  Another initiative will provide government guarantees for the short-term loans banks make to each other to run their daily operations.  More importantly, these actions are in concert with similar practices by other governments and central banks.  

 

None of these actions will solve our problems completely or save us from recession, but here's the good news.  It is a positive step in the direction of stabilizing the markets.