Monday, October 13, 2008

Central Bankers: Unlimited Free Money!

Today, the Fed made a statement regarding new central bank liquidity measures and boldly proclaimed that the sky is the limit on how much money banks can borrow - other central banks are following suit in their quest to give money away.

Fed statement

"Counterparties in these operations will be able to borrow any amount they wish against the appropriate collateral (my take: toxic waste) in each jurisdiction. Accordingly, sizes of the reciprocal currency arrangements (swap lines) between the Federal Reserve and the BoE, the ECB, and the SNB will be increased to accommodate whatever quantity of U.S. dollar funding is demanded."

"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."

HA! Keep pouring that money down the black hole - ain't going to work. Today we saw a nice dead cat bounce - picking up 936 points on the DOW, but 7,200 (over the longer term) won't be denied.

Did you see the report on Europe? They are putting $2.3 trillion on line for banks

European governments overcame their differences to put $2.3 trillion on the line Monday in guarantees and other emergency measures to save the banking system in their most unified response yet to the global financial crisis.

The pledges by six countries that use the euro and Britain helped soothe stock markets, along with a promise by top central banks to provide unlimited short term dollar credits.

Meanwhile Monday, the British government injected another $63 billion into some of the country’s leading banks Monday to avoid a full-scale collapse of the sector.

Can you imagine: Central bankers are now handing out unlimited free money to all the guilty bastards (big banks) who got us into this mess by creating, packaging and selling AAA rated dog-shit. Don't tell me they didn't know the longer term implications of their deceptive actions.

As an aside, what do you think the ramifications will be of all this new liquidity on G7 purchasing power?

Hyperinflationary depression here we come!



jerry said...

The banks have to decide if they want to get in on the hand-outs because if so, the government will be a shareholder, therefore a voice at all board meetings and have influence over management. So, do the banks bite?

Again, if they take the bail-out money and offer lending, who will borrow? Are companies and corporations and small businesses going to risk borrowing over the next few months or longer if the consumer is all dried up. The rich make up 23% of all income in the US, therefore, 77% makes up everyone else. If that 77% just does not feel like taking on anymore debt as home prices go down, as jobs disappear, as retirement portfolios evaporate, then who will borrow? Our business sector cannot support itself on only 23%.

My guess, the only borrowing we will see, for the most part, will be to pay interest payments on existing lines of credit and loans. $700 billion is really not that much to jumpstart a very sick economy.

Stagnation is rounding the Xmas aisles.

jerry said...

Correction---the US government will not be able to participate in the operations of the banks which borrow from the government even though they would own an investment stake in that bank. That was in the bail-out bill. The EU has been the moving force toward owning shares in banks that borrow from the central govenments, yet I don't know if they will have a voice at shareholder's meetings, either.

Crispin said...
This comment has been removed by a blog administrator.

Its reverse robin hood steal from the needy and give to the greedy.


Everyone else gets the crums.