1/ Yes. When a system is short of liquidity, it contracts. Think of what happens if your paycheck was cut by 20%. It is the same with banks but lending. If they cant finance deals because they lack the capacity, rates mean nothing.
2/ So markets expand when there is more liquidity to offset a shortage. The #fed cannot really inject money directly into these markets so it has to foreshadow what it is doing and let the markets take over.
1/ Yes. When a system is short of liquidity, it contracts. Think of what happens if your paycheck was cut by 20%. It is the same with banks but lending. If they cant finance deals because they lack the capacity, rates mean nothing.
Thanks so much as always for educating us uneducated.
2/ So markets expand when there is more liquidity to offset a shortage. The #fed cannot really inject money directly into these markets so it has to foreshadow what it is doing and let the markets take over.
3/ when risk on sentiment hits, people start buying, pulling money into different markets.