When faced with a budding financial crisis, the good central banker does a two-step dance. First, he (or she) staunches the bleeding, closing insolvent financial institutions, tightening lending standards, and otherwise making sure that bad loans stop being made. The good central banker then takes the second step: Pumping liquidity into the markets, to make sure that otherwise solvent institutions do not go under because the bad ones close. (From Businessweek)
How long this kind of covering can continue? Under a regime of fiat money, fractional reserve and interest based economy, it seems that the financial fiasco is just around the corner


0 Comments:
Post a Comment
<< Home