By James Park
With the demise of Lehman Brothers in 2008 and the subsequent septic shock that stemmed the flow of liquidity in the financial system, the Federal Reserve responded with an unprecedented infusion of liquidity that has continued into this year.
However, this heightened rate of infusion is scheduled to finish in July. With the looming end of the second dose of quantitative easing (QE2) the media has latched onto the analogy of Bill Gross, Pimco’s co-chief investment officer, of QE2 and subsequent liquidity pumping efforts as a Ponzi scheme. The recent exit of Pimco (one of the world’s biggest bond fund managers) from US Treasuries underscores Mr Gross’s huckster metaphor.
While there is an element of warranted alarm, seeing the crisis through the clinical prism of blood composition and stem cells may provide a more balanced view. Read more