{"id":198108,"date":"2007-12-12T18:22:00","date_gmt":"2007-12-12T23:22:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2007\/12\/12\/on-the-fed-shoveling-currency-out-the-door\/"},"modified":"2007-12-12T18:22:00","modified_gmt":"2007-12-12T23:22:00","slug":"on-the-fed-shoveling-currency-out-the-door","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2007\/12\/12\/on-the-fed-shoveling-currency-out-the-door\/","title":{"rendered":"On the Fed Shoveling Currency Out The Door"},"content":{"rendered":"

Yesterday, the Fed cut rates, and the market screamed in anguish<\/a>, because it was not enough.<\/p>\n

Well today, the Federal Reserve, and other nations’ central banks, came up with a scheme to deal with the credit freeze that is a result of what amounts to widespread insolvency in the financial markets (here<\/a>, here<\/a>, here<\/a>, here<\/a>), and here<\/a>).<\/p>\n

Basically, they are flooding the market with currency by lending out large sums of money on the basis of illiquid<\/strike> worthless<\/span><\/span> securities.<\/p>\n

Quotes from some of the articles cited above:<\/p>\n

You will note that it allows the lending of up to 85 percent of the face value of AAA-rated collateralized mortgage obligations, <\/span>if there is no observable market value<\/span>.<\/span><\/p>\n

…<\/span><\/p>\n

So much for discouraging future risk taking.<\/span><\/p>\n

…<\/span><\/p>\n

The most prominent sign of that is that the Libor, a benchmark for many dollar-loans between banks especially in Europe, has shot up as much as 0.8 percentage points above the federal funds rate. The gap is normally less than 0.2 points. A high Libor rate raises banks’ costs of funds and thus the rates they charge borrowers. In addition, many U.S. homeowners have adjustable rate mortgages with linked to Libor.<\/span><\/p>\n

…<\/span><\/p>\n

“Clearly, the Fed is feeling its way in the dark here,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.<\/span><\/p><\/blockquote>\n

(Emphasis mine)<\/span><\/p>\n

Nouriel Roubini says that this is, “Too Little Too Late To Address the Fundamental Problems of the Financial System<\/a>.”<\/p>\n

I tend to agree with Dr. Roubini, but he’s a bear, as I have been, for the past few years.<\/p>\n

Honestly, I think that what is going on here is the beginning of a major devaluation of US currency<\/span>, so people will be paying back loans in devalued dollars.<\/p>\n

Basically, it’s using inflation to get out of the problem. It was done during the Great Depression, and the amount ov exotic and dishonest leverage in 1929 is far less than now.<\/p>\n","protected":false},"excerpt":{"rendered":"

Yesterday, the Fed cut rates, and the market screamed in anguish, because it was not enough. Well today, the Federal Reserve, and other nations’ central banks, came up with a scheme to deal with the credit freeze that is a result of what amounts to widespread insolvency in the financial markets (here, here, here, here), …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1261,973,985],"tags":[],"class_list":["post-198108","post","type-post","status-publish","format-standard","hentry","category-bubble","category-economy","category-regulation"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/198108"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=198108"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/198108\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=198108"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=198108"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=198108"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}