Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

The Fed's Path

By

To be truly successful Bernanke must be willing to buy vast amounts of things like stocks and junk bonds in order to get the "liquidity" he wants into the markets.

PrintPRINT
It has now become obvious to me the path of the Fed. No, Mr. Bernanke is not going to be tough on markets. He is not going to give the medicine that is needed. He has chosen his path, the seeds of which were planted in his November 2002 speech about monetization (dropping dollars from helicopters).

The Fed today injected $65 bln of repos, extending credit to banks to shore up their liquidity needs. Normally the Fed only accepts treasuries as collateral. But the banks no longer have enough treasuries, or they don't want to sell their "safe" assets in exchange for credit. But they do have lots of risky assets like CDOs that everyone wants to get rid of. The Fed bent over and today announced they will take those "off their hands".

This is the monetization Mr. Bernanke referred to. He is talking tough in his rhetoric about inflation and keeping interest rates stable. I think he may stick to that. But out of the other side of his mouth he has decided to be even more aggressive by issuing credit to banks and buying risky assets for their balance sheet.

Mr. Bernanke thinks he can control markets. To be truly successful he must be willing to buy vast amounts of things like stocks and junk bonds in order to get the "liquidity" he wants into the markets.

This is alchemy finance in its truest form. All it will do is stave off the inevitable and make it worse when it happens.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE