Comments on: Fed: Target RANGE 0 TO 25 bp http://www.aleablog.com/fed-target-range-0-to-25-bp/ Alea Jacta Est Mon, 12 Jul 2010 20:04:31 +0000 hourly 1 http://wordpress.org/?v=3.0 By: jck http://www.aleablog.com/fed-target-range-0-to-25-bp/#comment-2199 jck Tue, 16 Dec 2008 22:39:31 +0000 http://www.aleablog.com/?p=2220#comment-2199 in the textbooks,banks lend when they have excess reserves, in the real world they need reserves and capital and they are short of the latter, so odds is that the fed strategy won't work. in the textbooks,banks lend when they have excess reserves, in the real world they need reserves and capital and they are short of the latter, so odds is that the fed strategy won’t work.

]]> By: sc http://www.aleablog.com/fed-target-range-0-to-25-bp/#comment-2197 sc Tue, 16 Dec 2008 22:13:28 +0000 http://www.aleablog.com/?p=2220#comment-2197 So bad is it? What kind of deflation is the Fed so afraid of that they would do this? The equity guys don't have a clue. Unintended consequence #1: People withdraw from money market funds and put money into Prime Rate funds, not equities or longer corporate debt. PPR way up. No amount of liquidity or capital will get the banks to lend at lower credit standards as they still bear that scar. Ben has to give it time. And pain. So bad is it? What kind of deflation is the Fed so afraid of that they would do this? The equity guys don’t have a clue.

Unintended consequence #1: People withdraw from money market funds and put money into Prime Rate funds, not equities or longer corporate debt. PPR way up.

No amount of liquidity or capital will get the banks to lend at lower credit standards as they still bear that scar. Ben has to give it time. And pain.

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