Wednesday, September 18, 2013

The Demand for Risk-Free Assets

What Are the Risks of Quantitative Easing, Really? by DeLong

Not fully versed in this fascinating subject. Mortgage-backed securities (MBS) filled this need during the "global savings glut." But S&P and Moodys were shown to be frauds.

My guess is that 4 percent inflation would help the situation but that's a no-go because Bernanke is afraid that the Fed my lose its street cred and we'd quickly turn into Weimar/Zimbabwe.

Creditors don't like seeing their contracts devalued.

What were "maestro" Greenspan's arguments in favor of the Bush tax cuts? What were the dangers of a budget balanced by his dot-com bubble? That it would morph into a housing bubble which would eventually pop with disastrous consequences? No I don't think that was it.
 

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