Trapped Behind a Wall of Unwilling Lenders

Gold Stock Technician
"In short, we are now living in a world of various vicious economic cycles, which are now self-reinforcing one another with the Fed tap dancing on the edge of what could be a developing “Liquidity Trap”. In the realm of monetary analysis, a ‘liquidity trap’ develops following a debt bubble bust, with the Central Bank moving to cut interest rates and increase the monetary base in order to stimulate the economy. However, as was seen in Japan back in the early 1990’s, “zero” interest rates failed to stimulate the economy because financial intermediaries such as banks were reeling under huge debt losses and became unwilling to lend. With banks unwilling to lend, the Central Banks newly created liquidity is trapped behind a wall of unwilling lenders, and therefore never gets into the real economy." (4/1/08)

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