The Confidence to Borrow and Lend By Neil Cavuto

Source: http://www.foxnews.com/story/0,2933,481724,00.html

Thursday, January 22, 2009



Being FOX's top nerd guy, I'm often asked about the ongoing financial crisis.

When will it end? Why so many rescues? Why so much stimulus?

I've always said this all comes down to one word: Confidence.

The confidence of borrowers to borrow and lenders to lend.

That's it.

Problem is right now, that isn't it.

Because folks aren't confident.

They're not confident to go out and buy things, so the folks from whom they would buy things, don't stock as many things, and so, start laying off workers who make those things.

To say the least, they're not confident.

At the least, their friends who have jobs worry whether they themselves should be confident.

So here we are.

And now we're looking at a problem that comes down to not one word, but two: Cash flow.

We need to keep the cash flowing, usually by cutting down on needless spending.

But sometimes that doesn't work. So we tap a Visa credit line to pay our bills, long enough to get back on our feet, so we can pay all those bills.

Now picture our government doing the same thing, only on steroids.

Right now it's spending about a trillion bucks more than it's making.

A trillion bucks more cash flowing out than cash flowing in.

Problem is we're seeing no bang for that cash going out, because still very little cash is coming in.

So we're doubling down by essentially charging up. Spending cash we don't have, assuming it soon will translate into cash we soon will.

Then we can pay all this off. Then cash will flow and we'll all be better off.

It is the essence of stimulus to insist it will stimulate. Even though it is the essence of reality to see so far it has not.

The cash still flows.

Pity the confidence does not.

Watch Neil Cavuto weekdays at 4 p.m. ET on "Your World with Cavuto" and send your comments to cavuto@foxnews.com