Börsennotizbuch

“They are essentially creating a $300 billion bank out of nothing,” said Lou Crandall, chief economist at Wrightson ICAP, a financial research firm.

“The Fed is saying if you don’t want those mortgages, then give them to us,” said Peter D. Schiff, president of Euro Pacific Capital, an investment firm in Darien, Conn. “The Fed thinks that inflation is the way to solve our problems, but all this does is create bigger problems.”

“The banks only have so much room and it is difficult for them to provide all the liquidity that the market wanted, given their balance sheet constraints,” Mr. Paterson said. “If you can stabilize the markets for a while, it is very constructive.”

“We still believe today’s action is not nearly a large enough step to make a big difference,” wrote David Rosenberg, chief United States economist at Merrill Lynch. “As with all the Fed’s steps to date, this move injects a bit more liquidity into the system, but does not cure the overall credit crunch or credit problems.”

Von NY Times: Fed Hopes to Ease Strain on Economic Activity

So basically the Fed is going to be swapping Treasuries for dubious securities, in an attempt to give the market a REALLY BIG slap in the face. I understand what they’re doing, and might have done the same in their place. Still, all I can say is Wheeeee!

NY Times, Paul Krugman

Bernankes Geldpolitik verstehen:

I’ve mentioned this before, but anyone trying to understand what the Fed’s up to should look at the 2004 paper Ben Bernanke co-authored on “Monetary Policy Alternatives at the Zero Bound”. One alternative was “quantitative easing” — basically forcing extra reserves on banks, whether they want them or not, which is what the Fed did in the first wave of panic. Another is “changing the composition of the central bank’s balance sheet”, that is, buying assets other than the usual T-bills.

We’re not actually at the Zero Lower Bound yet — the Fed funds rate is still 3, not 0 — but the Fed is already acting as if it believes that “preemptive easing” and the “inflation buffer” won’t be sufficient. Interesting times.

NY Times, Paul Krugman

Listen, investment banks have been going bankrupt since the beginning of time. If people make mistakes — if you bail out every investment bank that gets in trouble, that’s not capitalism, that’s socialism for the rich.

Jim Rogers, CNBC Video-Interview (via CrossingWallStreet.com)

The central bank also unquestionably has the power, by printing too much money, to create ferocious inflation– just ask Gideon Gono, head of the central bank of Zimbabwe.

Econbrowser