Sunday, December 7, 2008

What Are the Banks Doing With the Bailout Money?

The evolution of the economic crisis is getting very interesting. Increasingly, banks are buying government bonds. To a degree, the banks are getting out of the business of being like highly leveraged hedge funds. Instead they are loading up on government bonds. On the other hand, governments, in particular the US Government, are taking over the role of highly leveraged banks and high risk hedge funds. The source of new liquidity to the economy is leaving the private sector and being taken over by government. This is an interesting turn for the United States, a nation that was established on the principle of limited government. Continue reading . . .

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