[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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