The Federal Reserve Is In A Difficult Position
History has shown, at least for the past three decades that if the price of controlling inflation is a recession, then the Fed is usually willing to pay it. However the difficulty the Fed is facing now is keeping the fragile financial system stable. The Fed received a lot of criticism back in March for their bailout of Bear Stearns using taxpayer dollars to finance the acquisition by JP Morgan.
What most people don’t realize is how much the financial system is interconnected. The staggering growth of credit derivatives in the last decade, whose notational values have grown to the hundreds of trillions, leaves firms open to massive counter-party risk.
The derivatives market was a new profitable arena which financial firms jumped into with abandon. Since it is largely unregulated, firms were able to make sizable profits due to highly leveraged positions.
You can think of most derivatives as financial insurance policies that companies purchase to hedge against exposure to certain kinds of risk. However, unlike true insurance companies, these policies are largely unfunded due to the above mentioned lack of regulation and highly leveraged positions.
Bear Stearns was the smallest of the investment banks but it’s failure would have caused a tsunami in the financial landscape. While financial leverage can open the way to superior profits when times are good, it can spell disaster when times are bad.
The Fed has had to pretty much step in and inject billions of dollars into the money supply in order for financial firms to increase their capital reserves that had been depleted from the subprime meltdown. The capital was needed to prop up fragile derivative positions while they attempt to de-leverage themselves from the mess they’ve created.
The Fed isn’t afraid of a recession, they’re scared to death of another Great Depression that would most likely be the outcome if all those derivative positions get unwound. It wouldn’t be limited to this country either, it would be a failure cascade of global proportions.Il scopo di Keno e quello di indovinare quali numeri, iniziando da 1 a 80, saranno selezionati dalla macchina di casino online on net Keno.
