Evans-Pritchard Reports From WEF Conference

26 01 2008

The Fed did not panic –  “The move was imperative to prevent a grave financial crisis spiralling into disaster. The threat of a melt-down in the $2.4 trillion market for US municipal bonds had suddenly moved from possible to imminent. No monetary authority could ignore such risks… Calvinist monetary discipline at this point would wreak havoc, and possibly endanger the political stability of several countries (in Europe, if not in the US). The best we can hope to do is right the ship slowly, and turn a blind eye to moral hazard for now. It is not pretty. It means a lot of pin-stripe villains and leverage louts in the City will escape their condign punishment.”

US slides into dangerous 1930s ‘liquidity trap’ – Nobel economist Joseph Stiglitz says “The Fed has finally got around to closing the stable door, but the after the horse has already bolted … the distress is going to be very severe.”

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