solution to crisis situation

Whenever there is a problem there has to be a solution.

In the last posting we have come across an economic crisis. Now I am going to talk about the most probable solution. To resolve this government comes to picture. To start with govt will reduce the FED cutoff. So we have to know what is this FED cutoff. When banks dish out loans govt restricts the interest rates by restricting the lowermost interest rates. Why? Say there are 3 banks providing loans at interest rates of 7%, 7.5% and 8%. Now people will choose the provider according to the suitability of clauses. But if suddenly one bank comes up with a 4% interest rate then all will go him. Thus money stops circulating. To avoid this anomaly govt restricts the lowermost interest rate. This is the FED cutoff.

Coming back to the original problem govt will first reduce this FED cutoff by a small percentage. As a result many corporate companies will now again opt for loans. So money flows out, production increases, supply increases and the cycle continues. If govt finds still the problem stands out they will again first reduce this FED cutoff by a small percentage. And thus finally when they would be assured of the rebounce in economy they will increase the FED cutoff once again.