The plan of the big US money centre banks
to set up a fund to buy mortgage-backed
securities from hedge funds and bank conduits
aims to relieve the log jam in credit markets.
But it is also a scam to get the banks out of a
mess of their own creation.
It might work and free up credit markets.
But it won’t reverse the contraction of global
liquidity and the rising cost of capital in the
longer term. We are set for slower liquidity
growth, providing little room for further asset
price inflation (whether in equities, emerging
markets or commodities).
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