[lbo-talk] credit crunch
Julio Huato
juliohuato at gmail.com
Sat Jan 3 03:55:00 PST 2009
To prove to CCK that there's a credit crunch, there would have to be a
flight to gold or sea shells. Then baseline, short-term interest
rates (Fed funds, LIBOR) would refuse to yield to monetary policy and
shoot right up. If the Fed were to offer reserves for free to banks,
the banks would refuse them because base money itself would be deemed
toxic. Only then commercial paper and interbank rate levels would go
up as expected under CCK's credit crunch hypothesis.
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