No Quick and Easy Fix for This Market

This blog post originally appeared on RealMoney Silver on Aug. 13 at 8:17 a.m. EDT.

Since the housing market's collapse, cheerleading government officials, audaciously bullish strategists, investment bankers, commercial bankers and money managers, extrapolating economists and even irresponsible ratings agencies have felt the economy would not be affected. Skeptics were discredited (and forced to drink cheap tequila on the cold linoleum floor) because, in large measure, worldwide share prices continued to trace a pattern of nearly uninterrupted advances. They were all wrong; the economy has not been unaffected.

Many of those same observers have felt that the subprime disaster would not infect other parts of the credit market. They were wrong there, too, as the credit markets around the world have seized up and have been forced to rely on the injection of liquidity by central bankers in order to temporarily halt a full-fledged credit crunch.

The bullish cabal is now again arguing containment -- that a combination of potential policy decisions, such as allowing Fannie Mae (FNM Quote) and Freddie Mac (FRE Quote) to expand their lending ability, Fed easing and central bank liquidity adds, will be the ticket to a return to stability....