What broke the bubble?

William Barnett

MPRA Paper from University Library of Munich, Germany

Abstract: This paper is the basis for the Guest Columnist article in the Tuesday, November 11, 2008 issue of the Kansas City Star newspaper's Business Weekly. Because of space limitations, the published newspaper column had to be shortened from the original and unfortunately did not include either of the two supporting figures. This is the unedited source article. The position taken by this opinion editorial is that the declining trend of total reserves during the recent period of financial crisis was counterproductive, and the declining level of the federal funds rate during that period was an inadequate indicator of Federal Reserve policy stance. But the recent startling surge in reserves potentially offsets the problem, although for reasons not motivated by the issues raised by this article. In fact, the reason for the surge is associated with the declining stock of Treasury bonds available to the Federal Reserve for sterilization of the effects of the new lending initiatives on bank reserves.

Keywords: bubbles; bailouts; monetary policy; reserves; TAFs; sterilization; financial crisis (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 E61 G18 G28 (search for similar items in EconPapers)
Date: 2008-11-11
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-mac and nep-mon
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https://mpra.ub.uni-muenchen.de/11526/1/MPRA_paper_11526.pdf original version (application/pdf)

Related works:
Working Paper: What Broke the Bubble? (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:11526

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