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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (72747)	12/24/2007 1:17:24 PM
From: KyrosL	Read Replies (1) \| Respond to of 116555

>>The Fed has never issued free chips.<< You are quite right. The Fed has never given 'free' money to anybody during its existence -- other than the US Treasury, of course. However, when the Fed sets the discount rate at 1%, keeps it there for a year or more, and implies that it's going to stay low for a while, then banks can borrow short, lend long, and essentially coin profits with little, if any, risk. That's the way the Fed uses to indirectly issue money to the banks. It's not going to be different this time. If things become dire later in 2008, I expect the Fed funds to dip to around 2% or less and stay there for a while.