AI
Friday, April 25, 2003 7:07:36 AM
Mlsoft, Thanks for sharing that article. Interesting chart with comments below.
"The Doctor Is In...For most folks in economic and investment circles these days, belief in the Fed's ability to resuscitate the patient with continued shots of meaningful stimulation runs relatively high. It's no wonder given that this time tested methodology has been the economic and financial miracle cure over what has been the post war financial and economic history of the US. Moreover, it's also worked like a charm in many a global setting of decades past, albeit the one larger anomaly example being Japan of the last decade. Although Greenspan has taken a lot of heat for fomenting a financial (and economic) bubble in the first place, what really matters as investors is what happens ahead. Although we are in no way trying to suggest the Fed is guilt free in what has happened in this country over the past decade, our personal thoughts regarding the Fed's prior actions are a moot point. What matters most is what the markets currently perceive regarding the Fed. And it is crystal clear that when looking back at recent history, the markets have every right to give the current Fed the benefit of the reflationary doubt. In our minds, stimulus and reflation are the chief characterizations of the Greenspan led Fed almost since day one of his multiple terms.
The following chart is a picture of net free reserves in the banking system. In essence, what we are looking at is a picture of liquidity. We are looking at a picture of the ability of the banking system to lend based on the liquidity at its disposal. Anything above zero is excess liquidity in the macro banking system."
"The Doctor Is In...For most folks in economic and investment circles these days, belief in the Fed's ability to resuscitate the patient with continued shots of meaningful stimulation runs relatively high. It's no wonder given that this time tested methodology has been the economic and financial miracle cure over what has been the post war financial and economic history of the US. Moreover, it's also worked like a charm in many a global setting of decades past, albeit the one larger anomaly example being Japan of the last decade. Although Greenspan has taken a lot of heat for fomenting a financial (and economic) bubble in the first place, what really matters as investors is what happens ahead. Although we are in no way trying to suggest the Fed is guilt free in what has happened in this country over the past decade, our personal thoughts regarding the Fed's prior actions are a moot point. What matters most is what the markets currently perceive regarding the Fed. And it is crystal clear that when looking back at recent history, the markets have every right to give the current Fed the benefit of the reflationary doubt. In our minds, stimulus and reflation are the chief characterizations of the Greenspan led Fed almost since day one of his multiple terms.
The following chart is a picture of net free reserves in the banking system. In essence, what we are looking at is a picture of liquidity. We are looking at a picture of the ability of the banking system to lend based on the liquidity at its disposal. Anything above zero is excess liquidity in the macro banking system."
Joe
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