Market discipline on risk-taking by financial firms comes more from the cost of debt finance than from equity holders (given the limited liability nature of equity).
So it is the potential consequences of central bank lending for creditors that raises moral hazard concerns by reducing the cost of debt and potentially leading to greater leverage than would otherwise be chosen."
Jeffrey Lacker
"Most men of business think 'anyhow this system will probably last my time. It has gone on a long time, and is likely to go on still.'"
Walter Bagehot, Lombard Street
The housing data from this morning reawakened concerns about inflation.
Gold and silver were in rally mode with gold hitting the1900 level and silver closing above 28.
All in all not bad for a Comex option expiration.
The dollar moved lower into 89 territory.
The VIX was a little higher.
Stocks were trading weakly.
Let's see if gold and silver can withstand any post-expiration gut checks and nail some closing numbers over key objective prices, or not.
Have a pleasant evening.
