Yes Virginia, the Fed is in a liquidity trap.

Discussion in 'Wall St. News' started by blackchip, Jan 28, 2008.

  1. The United States is sliding towards a dangerous 1930s-style "liquidity trap"

    "The mechanism of monetary policy is ineffective in these circumstances. I'm not saying it won't work at all: it will help the banking system but the credit squeeze is going to go on because nobody trusts anybody else. The Fed is pushing on a string," he said.

    The grim comments came as markets continued to suffer wild gyrations, reacting to every sign of contagion spreading to Europe, Asia, and emerging markets.

    Wall Street has begun to stabilize on talk of a rescue for the embattled bond insurers, MBIA and Ambac.

    The Fed's 75 basis point rate cut allows the banks to replenish their balance sheet by borrowing at short-term rates and lending longer term, playing the credit 'carry trade', hence the 9pc rise in the US financials index yesterday. But confidence remains fragile.

    Professor Stiglitz, former chair of the White House Council of Economic Advisers, said it takes far too long for monetary policy to work its magic. This will not gain much traction in the midst of a housing crash. ...
  2. Daal


    fed would not allow deflation or liquidity trap. bernanke already said he could endorse a new money financed tax cut if necessary to get the economy out of a depressionary state and the banks are lending as show by libor
  3. Agree. Anything to avoid deflation.

    The title was a little joking, but Bernanke's got the devil's choice here.

  4. sometimes the economy moves wether the FED allows it or not.
  5. bgp


    japan has slid back into recession again . if thats any indication of whats happening in asia BEN and the fed. is powerless. which i believe is the case already.

  6. Yeah... besides his being a PUSSY!
  7. LOL; I don't know where you get that impression; Japan is far from recession; :D In fact; China just become the biggest trading nation with Japan;

    Jan. 28 (Bloomberg) -- Asian stocks fell, with the region's benchmark set for its biggest monthly decline since September 2001, on concern the U.S. and Japan are heading for recessions.
    Japan's economy probably entered a recession amid ``a slump in domestic demand,'' Tetsufumi Yamakawa, Goldman Sachs' chief Japan economist, said in a report today. Factory production will fall from a fourth-quarter peak, while consumer spending and the construction industry are both slowing, the economist said.
  9. S2007S


    "on concern the U.S. and Japan are heading for recessions."

    How about "IN A RECESSION".....