Fed Says ECB, Others to Offer Unlimited Dollar Funds (Update1) By John Fraher and Simone Meier Oct. 13 (Bloomberg) -- The U.S. Federal Reserve said the world's largest central banks will offer financial institutions unlimited dollar funds in an effort to ease tensions in money markets. The ECB, the Bank of England and the Swiss central bank will conduct dollar auctions at maturities of seven days, 28 days and 84 days at a fixed interest rate, the Washington-based Fed said on its Web site today. The Bank of Japan will consider the introducing ``similar measures.'' Global central banks are stepping up efforts to counter the worst financial crisis since the Great Depression. In addition to cutting borrowing costs in a coordinated intervention last week, policy makers have injected billions of dollars into global money markets to facilitate lending. ``Central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets,'' the Fed said in the statement. The ECB, the BOE and the Swiss National Bank ``can provide U.S. dollar funding in quantities sufficient to meet their demand'' into 2009. The collapse of New York-based Lehman Brothers Holdings Inc. precipitated the latest chapter of the 14-month crisis, causing banks to stop lending to each other out of concern they may not get their funds back. The Group of Seven finance chiefs, meeting in Washington over the weekend, vowed to take ``all necessary steps to unfreeze credit and money markets.'' To contact the reporter on this story: John Fraher in London at jfraher@bloomberg.net; Simone Meier in Frankfurt at smeier@bloomberg.net. Last Updated: October 13, 2008 02:48 EDT
1. The Central Bank borrowing facilities Although there is a short-term party in financial markets, I doubt this plan will work in the months to come. It doesn't deal with the most important issue: that banks are undercapitalised. If the Treasury doesn't quickly inject equity into the more troubled institutions (MS, GS, NCC, SOV, KEY etc.) then how will these institutions manage after 30 April 2009 when the borrowing facility is unavailable? Even still, some of these institutions may be insolvent by then. http://globaleconomicanalysis.blogspot.com/2008/10/fed-announces-unlimited-borrowing.html 2. the various guarantees for deposits and interbank lending The guarantees will work in the short term. But ultimately they will lead to currency debasement. It's just a matter of time until when a country larger than Iceland will face a currency crisis. http://globaleconomicanalysis.blogspot.com/2008/10/worthless-guarantees-and-printing.html
The below from Jim Sinclair Wrong financial targeting produces zero results after the first flush of glee and high fiving. 1. Who is going to guarantee the Federal paper of bankrupt nations? 2. After Lehman, what banks are going to have faith in the government guarantee of all and everything? You can make the public happy, but fellows, it is your landsmen who are panicked, not the general depositors. 3. Government guarantees of all and everything means an infinite printing of paper, be it a non marketable T-bill or pure cash. 4. The problem to avoid is the allowing of one quadrillion one thousand one hundred and forty-four trillion dollars of notional value to become real value. The Lehman bankrupt counterparty proves this. 5. Do you fellows really understand the anchor that is sinking your ship? I honestly don't think so at the level of G7 ministers. 6. If you are trying to fool the public, the action by FASB this weekend might have some real impact. It is not the public that is in a state of panic. It is an OTC derivative collapse accelerated by the Fed's error in letting Lehman enter Chapter 11. That moved nominal value to full value. Now a move to non-transparency is not going to do anything for the problem of banks trusting banks because of the valueless type of derivative after type of derivative. The FASB's reprehensible action might just be a major BACKFIRE. The FASB is violating their own mandate to protect the general interests of the public through transparent true value and clear auditing procedures. FASB rushes to get revised fair-value guidance out on Saturday Why? Because tweaked guidance on valuing assets could boost third-quarter earnings for some companies By Marine Cole October 10, 2008 2:05 PM ET (Excerpt from article) "Thus, Mr. Willens noted, âit would not be surprising to see third-quarter earnings reports show marked improvement from past periods as the values derived from âmark-to-modelâ assumptions exceed those resulting from the use of observable inputs, in such prior periods, with respect to the same securities.â More... http://www.financialweek.com/apps/pbcs.dll/article?AID=/20081010/REG/810109977/1028
Pretty much on target. Hopefully more countries will follow the UK plan and inject equity into the big banks. Otherwise there will be more countries like Iceland with currency crises.
A currency crises will emerge anyway. I thought the bailout bill would turn on the printing presses on 24/7, now they will have to double the amount of presses at the mint to keep up. I will wait for fiat currencies to start to fail and/or face serious devaluation, gold will return to a true store of value. Craziest market manipulation in world history, ALOT of money(albeit fiat untill turned to gold) to be made in the last 2 weeks and in the months ahead. Stay on your toes, volitility is spiking!
Yes it looks like the SOV problem might be solved soon. But SOV is just one of many big problems out there.
Since the US market for high-risk loans collapsed in August, central banks have been boosting liquidity into the banking sector to ensure that banks continue to extend credit to businesses. Smart Equity - mortgage Payoff, ask mortgage, live mortgage free, mortgage debt