The U.S Federal Reserve has been cutting rates and flooding the markets with liquidity like there was no tomorrow. Of course, with the situation in the credit markets the way they are, for some people and Hedge Funds, there is no tomorrow.

We need to listen to what the Fed and the various economists are laying the blame for this situation on. No, not Mr. A.G., but on the duration of the near ZIRP - Zero Interest Rate Policy - and the ever so slow quarter-point-per-meeting normalization process.

In the bad old days, there was Prohibition of Alcohol, which was blamed for all manners of Sins and Moral decay. To some degree that was true, as Alcoholism is a very serious problem/illness and does severely impact those closely associated with it. Even to this day Alcoholics Anonymous is probably one of the most consistently growing organizations worldwide.

There is a new "Daemon Rum" on the Horizon though. This Daemon is much more powerful than the old one and has slowly worked it way through society to the point where it is considered a good neighbor and beneficial industry. Even religious organizations cater to this Daemon and our politicians look to it to aid education and our Senior Citizens, as well as assist in balancing budgets without raising unpopular taxes.

As I read the many articles regarding the economy that are available on the web, I find that this picture is not so simple after all.

As the news is still breaking on the massive fraud at Societe Generale (SCGLY.PK), we can speculate that this may have been what caused the Fed to take such decisive action pre-market Tuesday. If so, the oil they spread upon the turbulent waters does seem to have helped, but I think the truth would have been better.

From early reports, no one but S.G., its shareholders, and perhaps an insurance company or two will take losses, and those losses will be limited. What we do know already is that far too many traders are shooting from the hip with little or no oversight by management.

"Walk! Don't run," was what our teachers used to say when we had Fire Drills in grammar school. Actually, I can almost hear them still yelling that as I raced to the door.

We had our Fixed Income Fire in the early part of this decade and a lot of people got badly burned by the ultra low interest rates. I am starting to smell smoke and perhaps it is time to use what we have learned from the past and have a Fire Drill of our own, just in case.

While reading various articles recently regarding the weakening economy, housing crisis, credit crunch and ongoing wars, it came to me that we are entering a point of Déjà vu all over again.

I refer back to the bad old days of the 60s and early 70s. We had a war going on in Asia. There were riots in the inner cities that were causing the destruction of peoples’ homes and businesses. Energy had begun or was already at all-time highs, with the establishment of OPEC, and Detroit had nothing but gas-guzzlers to offer.

Gold has had quite a run over the past few years and has recently broken its all-time highs. At least highs priced in current dollars. But then that is one reason why we buy gold, to preserve or increase the value of our current wealth. Inflation, as measured by what it costs you to live a decent life, has increased far above the levels recorded by government agencies. This is OK in my Book, as Government agencies need some sort of standard of measure to go by for the average of the population. They need a benchmark that they can have some control over by their interventions or they serve no purpose.

I am, of course, talking about the Central Banks. No matter what they do, they can not control or truly influence the global price of Food and Energy. If they lower the short term rates to Zero, 0, as was done in Japan for a number of years the price of a barrel of oil would still go up if there was not enough to go around. It might make it somewhat less expensive to search for oil with borrowed money but if you can not find an Ocean of it then the prices will still rise higher; and maybe more so as easy credit allows people to use even more natural resources.

By habit I am an early riser and begin my review of the previous day's market well before the opening bell. When I get to my brokerage accounts and start getting quotes on stocks I am interested in I have noticed that there are Bids and Asks at extremes to the closing price. This can be anywhere from a few cents to significant numbers.

For example, Akami (AKAM) had some nasty rumors Thursday that caused the stock to drop. Friday morning I put in a Bid to buy at $28 but I see that there is also a Bid in to buy at $0.01. That is not an error. The bid is for One Cent on a stock that closed the previous day at $28.03. A market order to sell might have been transacted at that price if there were no other offers. There was also an Ask to sell of $37 and that would cost a buyer $9.00 more than the close.

There are many exotic terms for new investment vehicles, derivatives and the like floating around. Not all are very well understood or explained by the general press.

New to me are terms like tranches, collaterlized debt obligation, (CDOs, which are made up of just about any type of loans backed by something that has some intrinsic value), [X] Mortgage Backed Securities, and [X] MBS, where X is either commercial or residential. Then there are ETFs and CEFs and trusts and what have you.

The question to be asked is not what caused the subprime implosion but rather what exacerbated it.

1. Subprime loans are not bad. They give people with moderate to low incomes an opportunity to participate in the American Dream of home ownership.