Monday, May 09, 2005

More Economic Ravings

I missed this little remark by Fearless Alan Greenspan:

From Financial Times, 5 May:
Main page content:
Greenspan warns on credit derivatives
By Richard Beales and Gillian Tett in New York
Published: May 5 2005 18:36 | Last updated: May 5 2005 18:36

Rapid growth in the credit derivatives markets has created considerable uncertainty about how the global financial system might react to any new economic shocks, Alan Greenspan, chairman of the US Federal Reserve, warned on Thursday.
The sheer complexity of derivatives instruments, in particular, coupled with the consolidation in the financial industry, made it increasingly hard for regulators and bankers to assess levels of risk, he said.

Translated into English it reads:  any drops in the dollar or spikes in interest rates will have exponential effects that could bring down some really big boys.
Certainly explains that cowardly 0.25 move the FOMC made last week.

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