Could the next global recession start in the obscure short-term US money markets?
- After weeks of trying to hose down these dark arcane markets with liquidity, the US Fed’s announcement that it would resume buying Treasury bills was a bland acknowledgement that US short-term money markets are the new flashpoint. Brace yourselves
US Federal Reserve chairman Jerome Powell announced that the central bank would resume purchases of Treasury bills in the hope of preventing a repeat of recent disruptions in short-term lending markets. This was far from being just the “technical” move that some have suggested.
It was an acknowledgement that these markets have become the new flashpoint for a crisis that could reverberate through the financial system and the global economy. The Fed can only hope to keep the markets cool (as with runaway nuclear reactors) by pouring in liquidity.
More of that later but it is a fair assumption that the world is going to be hearing more about these rather arcane markets from here on – and that will probably begin with the IMF and World Bank annual meetings this week. But first, more about Georgieva’s speech.
