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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: mishedlo who wrote (67950)8/23/2007 8:37:04 PM
From: Incitatus  Read Replies (1) of 116555
 
This is either blatant stupidity or a bold face lie. I believe the latter. How can one "restore liquidity" by borrowing money that one supposedly does not need? The statement makes no sense.

1. Wall Street knows that lying... er, being "confident"... is more important than reality. (See, e.g., Cramer's tirade clip where he admits that all the funds are lying to the public, saying everything is fine, and only Cramer can tell the truth.)

2. Lots of banks are teetering on the edge of collapse. They need liquidity, but won't go to the discount window because people will realize how bad off they are.

3. Banks that don't need liquidity borrow from the Fed, providing cover to the other banks so that they can borrow without stigma.

4. The near-bankrupt banks borrow from the discount window, thereby providing liquidity to the system.

That's how the liquid banks can provide liquidity by borrowing money they don't need. Isn't that it in a nutshell?
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