Don't spend so much time on the nutjob websites, you'll feel better in no time. LOL!
Posted on 12/18/2007 7:52:49 PM PST by Toddsterpatriot
Snip.. It is a no-brainer to say that the credit crunch is making liquidity scarce. It is less clear why central banks are powerless to do anything to stop it contracting, and why this shrinkage will sabotage economic growth as economies fall prey to the credit drought in places as far-flung as the Baltic states to China, as well in the OECD countries.
But to back up for a minute, what is liquidity? Two years ago, when confronted with financial-sector balance sheets and asset prices that were growing at a multiple of GDP and money supply that wasn't, we at Independent Strategy found our answer......
Further research indicated that what was driving asset prices was the supply of copious and cheap credit with which to buy them. This type of asset money or credit was not counted in the traditional definition of liquidity, which is simply broad money, made up of central-bank money and bank lending.
The reason for the exponential growth in credit, but not in broad money, was simply that banks didn't keep their loans on their books any more -- and only loans on bank balance sheets get counted as money...
No longer could central banks determine how much debt was created. They used to do that by limiting the amount of central-bank money they supplied, which formed the base of all loans, and then obliging commercial banks to make reserves for every loan. This made lending capacity finite. Now that the loans didn't stay on banks' balance sheets, this control mechanism was ineffective. Lending capacity became almost infinite -- for a while. Indeed, central banks didn't even control the price of money very well any more; again; risk appetite set how risk was priced and central-bank rates held very little sway over the outcome.
(Excerpt) Read more at online.wsj.com ...
They're not trying to.
Write the bad debt off now !
You should get right on that.
Don't spend so much time on the nutjob websites, you'll feel better in no time. LOL!
More from the article.
These measures are an extension of what central banks were doing anyway: substituting central-bank money for funds normally lent and borrowed between banks in the interbank market. The funds themselves are not a "net" addition to liquidity, because they are paid back when the loan becomes due. The Fed's additional TAF auctions will help fulfill the responsibility of the central bank to ensure the proper functioning of financial markets by providing temporary liquidity. But they are not an additional easing of monetary policy or a bailout of banks' bad assets.
Hardly.
Oil is the world currency.
If he's counting on the ability of Roach to predict the future.....
Most people have no idea how grave the present situation is or the disaster the country will face if trillions of dollars of over-leveraged bonds and equities begin to unwind.
How do bonds and equities "unwind"?
Fed chief Bernanke hasn't done much better than Paulson. His three-quarter point cut to the Fed's Funds rate hasn't lowered interest rates on mortgages
30 year mortgages are below 6%.
All it's done is weaken the dollar and trigger a wave of inflation.
The dollar has strengthened in the last week.
Bernanke's "master plan" is little more than a cash giveaway to sinking banks. It has scant chance of succeeding. The Fed is offering $.85 on the dollar for mortgage-backed securities (MBSs) and collateralized debt obligations (CDOs) that sold last week in the E*Trade liquidation for $.27 on the dollar.
Taking MBS as collateral for a loan that must be paid back is not a "giveaway".
They unwind when sold. If they sell below cost then the loss is made geometrically worse by the amount of the leverage.
30 year mortgages are below 6%
That means foreclosure for most who bought 4.5% ARMs two years ago and now have to reset. Not to speak of loans that are underwater due to declining home values.
The dollar has strengthened in the last week
According to BLS inflation statistics, the dollar has lost 95% of its value since the Fed was created in 1913. Confirmed by the fact that over the same period gold has gone from $35 to $800.
Taking MBS as collateral for a loan that must be paid back is not a "giveaway".
It is when accounting rule FAS 157 is being thwarted by extending its deadline. And why is the Fed money auction anonymous ? So much for transparency.
LOL! Don't tell the author, but 3.4 billion shares unwound on the NYSE today.
That means foreclosure for most who bought 4.5% ARMs two years ago and now have to reset.
The author said rate cuts didn't lead to lower mortgage rates. He was wrong.
According to BLS inflation statistics, the dollar has lost 95% of its value since the Fed was created in 1913.
LOL!
Confirmed by the fact that over the same period gold has gone from $35 to $800.
Gold dropped from over $850 in 1980. I guess the dollar strengthened in the last 27 years?
It is when accounting rule FAS 157 is being thwarted by extending its deadline.
How is that a giveaway?
And why is the Fed money auction anonymous ?
Ahhh, the secrecy is a giveaway. Why?
So much for transparency.
I guess we're doomed.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.