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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: RMF who wrote (190298)	6/27/2006 12:43:58 PM
From: Hawkmoon	Respond to of 281500

Hawk...when the Tech bubble burst, there wasn't a problem with absorbing OUTFLOWS....there was a problem with providing liquidity to the financial deficits. I guess I'm just a dumb country boy after all... Maybe you can amplify on the "cause/effect" of how financial deficits are hampered by outflows from equity markets? The liquidity problems I SAW were in the private banking system, where decreases in equity prices impacted CORPORATE bond ratings and default risks as economic confidences wanes. This is where the Fed was required to add monetary liquidity in order to prop up the PRIVATE banking system. But for those guaranteed government bonds, equity outflows resulted in tremendous inflows of cash seeking a safe haven. Btw, I might suggest you add the following discussion thread to your regular reading list: Subject 32953 You might learn something. Hawk