Sunday, March 23, 2008

How the Fed became a pawnbroker

I am not sure I like the Fed becoming a pawnbroker:
"With its new tools, the Fed has provided liquidity without printing much money. It has temporarily absorbed risky and illiquid securities, and supplied government securities, which are risk-free. So instead of monetary policy, in the sense we traditionally have thought about it, the Fed has become a risk-absorber (temporarily, we hope). Or, to put it less kindly, a pawnbroker."

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