Thursday, April 16, 2009
Run on Banks Persistent Risk Without LPB: Laurence Kotlikoff
The crisis persists. Our 17-month- old recession is deepening by the month. The unemployment rate rose to 8.5 percent in March, with 12.5 million Americans unemployed while millions more have stopped looking for work.
In the U.S., since peaking in 2007 stock indexes have dropped about 45 percent, the housing market has declined 30 percent and $11 trillion of household wealth has evaporated. Bank lending is down, and so are output and exports. Consumer confidence is at rock bottom, and saving is now chic...
...The potential for a national bank run is real. The Federal Deposit Insurance Corp. has $35 billion in reserves to cover some $4 trillion in potential liabilities. A massive run would require the Fed to print the difference. This would trigger hyperinflation and justify running to spend one’s money before prices rise.
The Federal Reserve has been printing money like crazy, adding more than $800 billion in the past year, doubling the monetary base. It’s printing another $1.2 trillion to buy long- term bonds. If banks start lending again, and the Fed doesn’t contract the monetary base quickly enough, our money supply will triple. If this doesn’t spell inflation, nothing does...
Bloomberg: Run on Banks Persistent Risk Without LPB: Laurence Kotlikoff
In the U.S., since peaking in 2007 stock indexes have dropped about 45 percent, the housing market has declined 30 percent and $11 trillion of household wealth has evaporated. Bank lending is down, and so are output and exports. Consumer confidence is at rock bottom, and saving is now chic...
...The potential for a national bank run is real. The Federal Deposit Insurance Corp. has $35 billion in reserves to cover some $4 trillion in potential liabilities. A massive run would require the Fed to print the difference. This would trigger hyperinflation and justify running to spend one’s money before prices rise.
The Federal Reserve has been printing money like crazy, adding more than $800 billion in the past year, doubling the monetary base. It’s printing another $1.2 trillion to buy long- term bonds. If banks start lending again, and the Fed doesn’t contract the monetary base quickly enough, our money supply will triple. If this doesn’t spell inflation, nothing does...
Bloomberg: Run on Banks Persistent Risk Without LPB: Laurence Kotlikoff
Permalink posted by markw @ 5:17 AM 
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