March 18, 2008

The Fed's Desperation Move

The Fed's Desperation Move

by Gary North

I do not have a new message here; we have known for a long time that advance preparation and a strong balance sheet are the keys to riding out a financial storm. As I have emphasized before, the Federal Reserve can deal with liquidity pressures but cannot deal with solvency issues.

~ William Poole, President,
Federal Reserve Bank of St. Louis (February 29, 2008)

The Federal Reserve System announced a new program on March 11. The announcement was not quite gibberish, but it was close. This much was clear: it is a $200 billion program.

The stock market bulls thought, "Wow! That's huge! That will solve the problem!" They did not read the details of the proposal.


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