levin70

A Third Way in the Current Inflation / Deflation Debate (But It's Even Scarier)

Cam

I enjoyed your article and share your opinion on where we are headed. I enjoyed the fact that Fed officials have finally begun discussions of reversing the policy actions taken. I however, and I think you will agree ( :) ), am worried about Mr. Ben's hubris about how "easy" it will be to reverse the accomodative policy actions to date. I see no easy way to accomplish such a reversal in the short to intermidate term (next 3 years or so). Selling the longer dated maturity securities for cash they have acquired will be near impossible in the short term. Issuing bonds is unproven at this point and would create the problem of crowding out from treasury borrowings.

Regards

Berkshire Hathaway Credit Risk, Index Puts Are Overblown Worries

The only problem with your analysis is you don't know what happends to the collateral requirements if BRK looses its AAA rating. If that happends, my guess is just like AIG it must put up collateral. If that happends anytime over the next year, that collateral requirement could cause the liquidity crunch you don't think will happen.

Kind Regards