Thursday, December 13, 2007

Central Banks Around the World in Panic Mode

If at first you don't succeed, try, try, again:

Central banks in Europe and North America moved Wednesday to increase the amount of money they could lend to banks and to make it more readily available in an attempt to ease the credit squeeze.

It was the first time since the Sept. 11, 2001, terrorist attacks in New York and on the Pentagon that these central banks have coordinated their support of financial markets.


The move by the central banks should get more money to banks at interest rates lower than what they would have to pay if they borrowed at the Fed's discount window. The Fed will auction up to $40 billion in loans to banks at two auctions next week and undetermined additional amounts at two auctions in January.

The Fed also said it was making funds available to allow the European Central Bank to lend $20 billion and the Swiss National Bank to lend $4 billion to European banks that needed to borrow dollars.

In Frankfurt, the ECB said it would offer euro-zone banks as much as $20 billion to help cover their dollar-denominated liabilities.

"The general objective is to address elevated pressures in the short-term money market," said Lucas Papademos, an ECB vice president.

At its meeting Tuesday, the Fed lowered its target for the federal funds rate, the rate banks normally pay on overnight loans to each other, by a quarter point to 4.25 percent. It also lowered the discount rate, the rate at which the Fed will lend to banks on loans secured by virtually any collateral, by a quarter point, to 4.75 percent.
There are billions being "liquidated" into the market. What does this mean? We are printing more money while at the same time lowering interest rates. Savings will go down, borrowing will go up, a mini credit boom might happen (but it's still going to end in a huge bust), and inflation is going to destroy what little earnings many poor Americans make. This is welfare for people (primarily overambitious homeowners and upper class bankers and investors) who made terribly poor decisions by over inflating the credit market with artificially low rates on mortgages. The effects of this keep going on and on, and the Fed keeps making move after desperate move, but nothing seems to work too much.

Granted, the "liquidity" might be a short term solution MAYBE. If anything, the Fed does it for those assholes on Wall Street who are just lining up for the slaughter. They want more liquidity so that stocks can rise, not realizing that the amount of the stocks may actually be worse LESS due to inflation (although it won't be instantaneous). This is a tax on the POOR, and the middle class that actually acted responsibly.

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