fed has injected money into banks?

Question

http://news.morningstar.com/external/briefing.html?vpage=InDepth/StockMarketUpdate

the Fed has injected 10 billion dollars into the markets to provide "liquidity". what does that mean exactly? loans or what?

thanks to those of you that answered my question and understood that I actually knew what liquidity means, but was unsure of how the government would pride the cash

Answer 1

The Fed made more money available for banks to loan out by lowering the Federal Funds rate (it is a complicated process, just trust me, it works).

They also released more actual dollar bills into the economy making the economy more "liquid."

Liquidity is just the measure of how much actual dollar bills there are floating around in the economy. Too little liquidity slows the economy down, too much liquidity speeds the economy up too fast.

Most of the time, 80-90% of the money in the economy exists only electronically. There are not enough dollar bills to go around if everyone went to the bank and took all their money out, sold their stocks, etc. This is ok, but if too many people get nervous about the economy and start to gather their cash, the liquidity of the system decreases and the overall economy slows down.

Hope this helps,
Good luck!

Answer 2

it means the Federal Reserve purchased $10B worth of government bonds from the open market.

Answer 3

It gives the banks eaiser access to money to conduct the day to day transactions that spark investment.

Answer 4

Try looking up liquidity.

Answer 5

Yeah try lookin it up!