What happens when banks are afraid or reluctant to give money?

What happens when banks are afraid or reluctant to give money? Sunday, February 1, 2009 By Dodji. com The recent months have been hectic, as the indices bounced back trying to find a market bottom. When analyzing the overall market via the S & P 500, we can see that, despite the worsening economic data, markets continue to hold above their lows before. U. S continues to pursue other economies to send in a downward spiral because of their lack of consumption. The savings are based on consumption of the U. S have found themselves struggling against their economic collapse, while other economies that have benefited in the past financial services have declined because of losses. For example, the economy U. K has prospered in the past on services, including banking, insurance and business services, which represent by far the largest proportion of their GDP. Official shall make every effort to try to control the situation, but analysts are still tired of whether current efforts will be sufficient. To date, officials of S U. still have 350 billion dollars over the original plan of 700 billion bailout to try to get the economy back on track. Despite the large amount of remaining funds, analysts now believe are now saying he will not be sufficient to cure the economy. News showed this weekend that officials U. S is already preparing the next steps to help the battered economy. Over the weekend regulators in the U. S 3 other banks closed bringing the number of banks closed since the beginning of this economic crisis, a horrifying number of 31 banks. monetary easing is a way to revive a battered economy, but what happens when money is injected into the financial system is not accessible to the public? Government officials have been quick to fire their cannons, flooding the financial markets of excessive liquidity, while engaging in the fiscal stimulus. Some banks have been nationalized, while others have their assets liquidated cash allowance. Even if funds were added to the markets, banks are reluctant to ease their lending conditions, forcing a lower consumption. Even if Libor rates are down, they are not falling fast enough to improve the economic situation. Lack of use has put pressure on growth and inflation, forcing the two into a downward spiral. From what was to be a simple process of monetary easing, proved to be a much more complicated than consumer consumption continues to decline making inflation and growth, forcing the Fed to use all its tools and options . They have already cut their funds rate to 0-0. 25% level, and it is still not help the economy. When you take a look at the chart below we can see a similar situation occurs in all economies. Central banks are struggling with inflation declining to try to avoid deflation. Deflation, or a general decline in prices, often caused by a reduction in money supply and credit. The same situation occurred in Japan and led to a lost decade. Despite all the negativity in the markets, as mentioned above, the indices are still holding above their previous highs. Take into consideration that changes in interest rates have an immediate effect on the economy and normally take 6-9 months a leak in the financial system. When analyzing a bond market can see that the money has been leaching from long-term bonds, but stocks failed to rally. In addition, the volatility has declined from its peak before negotiating around 45 points. Gold has continued to show strength, while the currencies are showing mixed directions. Facts • The dollar continues to hold high the market because of skepticism • Gold is the stimulation of the front • deflation concerns now facing currency pairs • • show mixed signals continued economic growth of previous action dropConclusion • money should begin to affect the economy. • The major indexes above must have their lowest level before to maintain the relative strength • A fall below their lowest before the sale will lead to mass. • If inflation continues to decline, gold could continue to rise • Market uncertainty and declining inflation could lead to consolidation in all markets, including currency pairs. S & P 500 Daily Chart Daily ChartGold * Both maps are courtesy of Stockcharts. Cominform reliability and liability: The content is intended solely for the use of “Experienced” investors in financial markets who are fully aware of the risks inherent in trading. 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