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That's true. But another way to look at it (not necessarily good), it's like the water in desert. You are in the middle of the desert and you need water - you a
by TheAlchemist 7y ago
That's true. But another way to look at it (not necessarily good), it's like the water in desert. You are in the middle of the desert and you need water - you ask a guy - lend me some water please, I will buy you back the same amount once we are home. Technical speaking, the amount you get and the amount you give back is the same.
What happened during the last crisis is also a great illustration - many banks took taxpayers money during the 'dark hours' then paid it back easily some time later, when the air cleared. Some went as far as to suggest it wasn't necessary at all. Well, the truth is, the banking system as we know it survived only thanks to governments stepping in - otherwise none of the banks we know would exist today. There was 0 trust during the crisis - and all the banking system is build on trust.
That's why the FED is "taking a sledgehammer to squash a bug". That's also why it's a very disturbing signal. My gut tells me shit is about to hit the fan.
PS. But don't try to time the market and short it - as the saying goes, the market can stay irrational longer than you can remain solvent.
- anon1m0us 7y agoYou don't have to short it, however, would it make sense to start selling things? Where should money be right now or where should it start going if it is about to hit the fan?
- cloakandswagger 7y agoIf there truly is a cash shortage to the point that it is threatening bank liquidity, the Fed's likely response would be dropping rates and increasing the money supply with another round of QE. If that happens, you should be buying, not selling, since QE basically acts as a subsidy for equities as institutions seek yield with cheap money.
- shitgoose 7y ago"otherwise none of the banks we know would exist today" isn't that a good thing? otherwise they will never learn.