After last night's not-so-surprise announcement that some of the Fed's emergency lending provisions were being ever so lightly diminished (no bank is using the discount window now anyway), there was a quick and brutal reaction in stocks and bonds and a jump in the dollar. We expect knee-jerks to be part of the equation.
This morning, however, the Double Dip camp is going to make itself heard. They will tell the story of how liquidity was yanked too early in the '30s before the fragile recovery could stand up on its own two feet and how this led to a slide back into depression. There will be references to 90's Japan galore.
My pal The Pragmatic Capitalist has two takes on this latest move - a cautious one from Morgan Stanley and a nonchalant one from BNP Paribas. Both worth your consideration before tuning into whatever hysteria business television has in store for us today.
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