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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (36193)	11/13/1998 4:20:00 PM
From: Michael Bakunin	Read Replies (1) \| Respond to of 132070

Interesting analysis by Cleveland Fed (PDF): clev.frb.org "The Fed can enlarge the banking system's capacity to take up the slack created by less liquid capital markets, but it cannot alter the underlying risk profiles of the real investment activities that capital markets had previously been funding." "Once people are satisfied that they've regained their ability to appraise the risks associated with various forms of investment, more markets will begin operating smoothly again. Of course, the relative cost of financing could become so great that certain kinds of projects are no longer profitable, but that would not necessarily be a bad outcome. In the past, similar projects obtained financing only because of unreasonable risk assessments. Monetary policy must, of course, not allow credit availability to evaporate unduly. On the other hand, it would be counterproductive to pour water on a drowning man." mb