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Averting another financial crisis

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The US Federal Reserve Board’s decision in March to throw the kitchen sink at whatever the coronavirus would do to financial markets provided a turning point for the US financial system, and prevented it from breaking.

Post-mortems on what was happening at the epicentre of market action have suggested the Fed averted another financial crisis. 

The markets for Treasury securities and mortgage-backed securities, which were normally highly liquid, nearly "buckled" under the strain of the massive flows of funds in response to the pandemic. The market for Treasury securities provides the foundation of the US financial system and is a key plank – in fact, the key plank - within the global system.

https://www.smh.com.au/business/markets/too-big-to-fail-how-the-fed-averted-another-financial-crisis-20200728-p55g5i.html



What do you think?


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Comments
Glenn Barnes @ 2020.07.29 10:18 AM
Makes me wonder: How will the "house of cards" hold up in the longer term?

IdeaSpies @ 2020.07.29 10:34 AM
Yes Glenn we averted one crisis and what's next? - interesting that the article says at the end that the concept of risk-free markets and a state-provided safety net for investments by leveraged and non-regulated institutions is contrary to the fundamental principles of market capitalism. Plus it's adding to income and wealth inequality.


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