Things to worry about today number two: Financial Meltdown
Three blog posts and one column from Paul Krugman all give reasons why the financial markets may be in the midst of a meltdown. Unfortunately, I don't understand the arguments. Can any of you help me?
Krugman's saying that the Fed's recent actions are basically like slaps in the face to give the markets a chance to catch their breath, but that we're on the third slap and the slaps don't seem to have more than a momentary effect. So what the Fed's doing is just a drop in the bucket, and if the markets don't respond, way more drastic measures need to be taken. (Like what?) This seems to be a key sentence: "But a sterilized intervention means an intervention that doesn't affect the monetary base - swapping dollar t-bills for euro T-bills, or T-bills for mortgage-backed securities. And here the numbers are much bigger: $11 trillion in home mortgages, for example."
What Is To Be Done?
What's Ben Doing?
Why Sterilization Matters
The Face-Slap Theory
Krugman's saying that the Fed's recent actions are basically like slaps in the face to give the markets a chance to catch their breath, but that we're on the third slap and the slaps don't seem to have more than a momentary effect. So what the Fed's doing is just a drop in the bucket, and if the markets don't respond, way more drastic measures need to be taken. (Like what?) This seems to be a key sentence: "But a sterilized intervention means an intervention that doesn't affect the monetary base - swapping dollar t-bills for euro T-bills, or T-bills for mortgage-backed securities. And here the numbers are much bigger: $11 trillion in home mortgages, for example."
What Is To Be Done?
What's Ben Doing?
Why Sterilization Matters
The Face-Slap Theory