07-25-2012, 09:21 AM
["I've been waiting on this for almost 40 years.....The most powerful tool in the Fed's arsenal fighting recession is Bank Reserve Requirements. The last two cuts in Bank Reserve Requirements was 11/13/74 and 1/20/75. All Reserve Requirement cuts have produced 20% or greater market rallies in the following 18 month periods. This tool amounts to an overnight immediate expansion of loanable funds in banks, and has no lag effect such as interest rate cuts do. I credit Norm Fosback's research many years ago and would highly recommend his book "Stock Market Logic"]
Hadn't thought of that, I have to say. They use it in China but very rarely in the West (at least not that I'm aware off).
Not so sure it will work, besides psychology (which nevertheless might be important to underpin asset prices). Banks are stuffed with reserves already, it's credit demand which is the problem.
But for sure we're going to see something coordinated by central banks pretty soon.
Hadn't thought of that, I have to say. They use it in China but very rarely in the West (at least not that I'm aware off).
Not so sure it will work, besides psychology (which nevertheless might be important to underpin asset prices). Banks are stuffed with reserves already, it's credit demand which is the problem.
But for sure we're going to see something coordinated by central banks pretty soon.