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Commercial paper market froze up suddenly
The commercial paper market froze up suddenly.
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The Global Financial Crisis
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Immediate triggers of the financial crisis?
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Sudden evaporation of market confidence/trust
Sudden evaporation of market confidence/trust☜Confidence/trust in the ability of others to pay debts suddenly evaporated from the market: with the result that few are willing to risk lending any one else any money.☜59C6EF
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Commercial paper market froze up suddenly
Commercial paper market froze up suddenly☜The commercial paper market froze up suddenly.☜9FDEF6
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Money Market Mutual funds moved into Treasury Bills
Money Market Mutual funds moved into Treasury Bills☜The ultra-conservative Money Market Mutual Funds withdrew $100 Bn from the commercial paper market across two days (in effect an old fashioned bank run) and put most of it into Treasury Bills (perceived to be the safest haven amid the uncertainty).☜98CE71
⇤
Banks' borrow-short-lend-long strategy backfired
Banks' borrow-short-lend-long strategy backfired☜Banks typically make profits by borrowing short-term funds and lending long-term at higher rates. When the mortgage-backed securities market froze, banks could neither sell their holdings nor use them as collateral for new borrowings. Large investment banks failed.☜FFFACD
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No one knows the scale of any player's existing liabilities
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Risk that no one will want to lend anyone else money
Risk that no one will want to lend anyone else money☜Risk that the freeze in the commercial paper market would spread to all markets, with no one being prepared to lend anyone else any money.☜9FDEF6
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David Price
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Entry date (GMT):
10/6/2008 9:53:00 PM
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10/6/2008 9:53:00 PM
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