Redstate

Posted at 8:36am on Apr. 9, 2008 Waiting for the Patient to Start Breathing Again

Liquidity Crisis and Credit Crisis

By blackhedd

As I told you yesterday, there are gathering signs that the liquidity crisis which has roiled money markets since early this year, and became a series of convulsions after the Bear Stearns collapse, is abating.

If conditions continue to stabilize and improve, then we can say that aggressive Federal Reserve intervention indeed solved a systemic liquidity problem that affected the financial system more seriously than similar problems in the past.

But if the defibrillator worked and the patient’s heart is beating again, we’re still waiting for him to start breathing. Dealing with the liquidity crisis doesn’t mean we’ve done anything to fix the credit crunch.

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