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Liquidity Flood?

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The Fed and the BoE can either let the banks go or flood the system with liquidity.

Why is the latter option preferred (sure, the Fed, etc., are heavily influenced by the banks, but surely - at the end of the day - they'll not risk everything on their behalf), and how much liquidity can they flood the system with? Will it ever be enough,? Won't such rash action undermine both the $ and £ above all other currencies?

As Will Hutton commented yesterday - "How big is the void between all the debt and the actual, slipping, value of the property that is supposed to be sustaining it? Goldman Sachs estimate the gap at $2trn; Professor Nouriel Roubini, of the Stern School of Business at New York University and a contemporary Nostradamus, says the number is $3trn" And every day the gap widens - 3,000,000,000,000 and on and on - and that's just in the US of A. God help us.

This is nuts. I might dust off my old economics books from university days (please noooooooooooooooo! - Economics by Begg, Fischer, Dornbusch, the economic way of thinking and economics explained still give me nighmares) but I doubt they'll shed much light.

Edited by gruffydd

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Or should that be bleakonomics!


"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 [Joseph Stiglitz] said.

Edited by gruffydd

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  • 292 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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