Today central banks around the world decided to inject more monetary liquidity into financial markets to help improve credit conditions and fuel economic growth per MarketWatch. As we know from Zimbabwe and the Wiemar Republic, cheap money only goes so far to fix systemic flaws in economies such as unsustainable growth and dysfunctional economic management.
The real reason behind these liquidity pumps might only be to help banks such as Bank of America spend their way out of exposure to bad debt, and Eurozone banks obtain access to money. In other words, yet another bailout of sorts.
For moves like this to work, they have to cause a chain reaction in the economy. Banks have to want to lend money, and in this sense, increasing liquidity is like using water to extinguish a chemical fire. Moreover, with the dichotomy of today's financial news, economic problems seem hot and cold.
• ADP: November private sector jobs increased by 206,000
• BLS: 3Q, 2011 productivity up 2.3%, labor costs down 2.5%
• DXY down near 78, Gold price up near $1,744 per troy ounce
• CNBC: Mortgage applications down despite low interest rates
• Reuters: Occupy LA evicted by police
• WP: China liquifies economy with lower bank reserve requirements
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