2012beof-111206092256-phpapp02

2001 2002 2003 2004 2005 source us treasury 58 page

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Unformatted text preview: ystem continues to recover from a credit-driven recession caused by a combination of interest rates being kept too low for too long and insatiable global demand for fixed income that was grossly mispriced by rating agencies and financial markets. The subsequent credit lockdown required a massive fiscal (TARP and TALF) and monetary (QE1 and QE2) government response in fear of greater peril. While the first steps focused on transferring toxic debt from large banks to the federal government, later actions provided a steepening yield curve, which increased bank profits and capital. 2012 Colorado Business Economic Outlook The Fed concluded at its Jackson Hole meeting in late August that the economic recovery was at risk from Washington’s polarizing budget debate and the European debt crisis. The Fed responded with Operation Twist, hoping to spur economic activity by lowering long-term rates through the purchasing longer-dated treasuries with their maturing short-term securities. Ironically, prior monetary and fiscal actions helped to stabilize and rebuild banks, and Operation Twist potentially dest...
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