The Fed this morning has decided to continue to extend the length of the "temporary" emergency lending facilities into next year. The facilities that were originally planned for only 28 days have now been extended not only beyond 28 days, they have now been extended for at least the next six months! They have also begun a new additional rescue vehicle, unheard of before, and extended and expanded the swap facilities with the European Central Bank. I guess this means that the Fed sees the crisis continuing at least into next year. With the additional powers that the Congress seems determined to give the Fed, the creature from Jekyll Island is rapidly growing into the monster from Jekyll Island.
I always try to look between the lines when events like this occur. Many investors react only to the headline, and the stock index futures are trading sharply higher as a result. However, that reaction is very short-term, lasting literally no more than a few days, and most of the time, just a few hours. I like to ask myself what prompted this action by the Fed. What does the Fed see that makes this action necessary? If circumstances were good, then such Fed actions wouldn't be needed. But in this case, the Fed has explicitly stated that economic circumstances as "fragile". I'll take them at their word.
I always try to look between the lines when events like this occur. Many investors react only to the headline, and the stock index futures are trading sharply higher as a result. However, that reaction is very short-term, lasting literally no more than a few days, and most of the time, just a few hours. I like to ask myself what prompted this action by the Fed. What does the Fed see that makes this action necessary? If circumstances were good, then such Fed actions wouldn't be needed. But in this case, the Fed has explicitly stated that economic circumstances as "fragile". I'll take them at their word.
