Libor matters also because many loans to households and non-financial businesses are priced off it, especially three-months Libor. The chart also makes it clear that, to the extent that 3-months Libor is a good measure of the marginal cost of funds to households and non-financial firms, there has not been a 50 basis points cut in effective interest rates (what the coordinated central banks delivered on Wednesday 8th October) but a 100 basis points increase in the UK, a rather smaller increase in the euro area (which has consistently had the smallest spread of the three countries) and a 150 basis points increase in the USA.
On those grounds alone, one could justify at least a 100 basis points cut by the MPC next month. To actually bring the marginal cost of funds down significantly below the August 2008 level, a 150 basis points cut would be required. Should the Libor-OIS spread, and the associated marginal cost of funds to households and non-financial enterprises, come down significantly between now and November 6, the case for official policy rate heroics would be correspondingly reduced.
But absent material help from the Libor-OIS spread, now is the right time for constructive panic. If not now, then when? So lets panic with deliberation and determination, by implementing a larger-than-expected cut in Bank Rate of at least 100 basis points
Here's a thought...with these swap lines the USG would appear to be gaining quite a bit of leverage(no pun intended) versus the countries we're providing these lines to. The next administration could be in a position to extract quid pro quo in negotiations over the shape of whatever new international financial system emerges. Granted, we have major issues but it's not the US taxpayer's fault that German banks levered themselves using AIG swaps instead of real equity.
These interventions, government price controls on debt, support for failed businesses, support for failed states and support for failed businesses are all coming at a dramatic future cost.
Someday, the future is going to be upon us. Can American really withstand raging inflation? How about double digit interest rates? How about capital controls?
Bureaucrats at Fed and Treasury can't seem to see past their noses.
holy crap - down ~1%?!? That's just wrong. I am not bragging here because it was more or less dumb luck but I bought into SDS around 15 minutes ago when the SP500 was up what 3% or so? How can anyone, ANYONE think things are ok, be it CBC or not. It's just wrong, dudes (and dudettes). Just wrong.
Well, the GDP might have been leaked, and it might be sort of on the slight negative side, but just be patient and wait. The q4 gdp is going to be something that rivaled the 82 recession saar drops.
Please tell me if I understand this correctly, as I may be mistaken. The Fed is creating arrangements with -by now- just about all central banks in the world. The gist of those agreemenents is: please buy dollars when we tell you to do so, and we will reimburse you, with dollard. (At least, that what I would think, since the only currency the US can print is the dollar.) What are all those other central banks going to do with those dollars when the dollar finally will drop?
Mr. Beach writes:
I feel like a complete moron for saving and spending within my means all these years.
And I feel a little less of a moron for not saving enough in the past 30 years. But a bout of 1,000 percent a month inflation will make either of our saving quite moot anyway.
Is it true that with the new swap arrangements, the dollar will be stronger? It seems any excess liquidity is sapped from the market, and offered to the banks, now through swaps with korea, mexico and others. This should be bullish for the dollar...no?
first?
no way.
fouth by now
From a Brit Snob:
Libor matters also because many loans to households and non-financial businesses are priced off it, especially three-months Libor. The chart also makes it clear that, to the extent that 3-months Libor is a good measure of the marginal cost of funds to households and non-financial firms, there has not been a 50 basis points cut in effective interest rates (what the coordinated central banks delivered on Wednesday 8th October) but a 100 basis points increase in the UK, a rather smaller increase in the euro area (which has consistently had the smallest spread of the three countries) and a 150 basis points increase in the USA.
On those grounds alone, one could justify at least a 100 basis points cut by the MPC next month. To actually bring the marginal cost of funds down significantly below the August 2008 level, a 150 basis points cut would be required. Should the Libor-OIS spread, and the associated marginal cost of funds to households and non-financial enterprises, come down significantly between now and November 6, the case for official policy rate heroics would be correspondingly reduced.
But absent material help from the Libor-OIS spread, now is the right time for constructive panic. If not now, then when? So lets panic with deliberation and determination, by implementing a larger-than-expected cut in Bank Rate of at least 100 basis points
what about the simple $66 million for the bank of monta's ankle?
Everyone gets a bailout!!!
Geeze, what happened to the USA?
GDP advance before the open. Step right up and place your bets.
Crank up that printing press... we'll hit DOW 10K by fraud or inflation.
Next up, $30 billion for the Bank of CR & Tanta.
What's your CD rate?
I can haz containmentz?
Will the last person to receive a bailout please turn off the democracy?
What the fuck are these guys doing?
Are we seriously going down the Weimar path?
Is there no appetite for responsibility anymore?
I feel like a complete moron for saving and spending within my means all these years.
Speaking of Tanta, if you're out there, lady...we miss you to pieces. Our thoughts are with you until you return.
Please do soon.
eev on sale, half off.
But seriously, how does one go from 200 two days ago, to 102 today?
Those inverse funds are just trouble looking for a place to happen.
Next up, $30 billion for the Bank of CR & Tanta.
Greedy. I'm only looking for a $5M hit for North End Loans and Tacos.
"Next up, $30 billion for the Bank of CR & Tanta."
And what is the name of your currency to be swapped - the Cranta?
Blondie is back!
SRS today (5 mins ago). If GDP tomorrow makes the market feel good and we pop some more, 50% more SRS. If not, quick exit.
oops - meant SDS - just had a panic freak out there
The markets have become farcical, no?
cliff-diving...
Salomon,
the tantric...
[oops - meant SDS - just had a panic freak out there
feesher ]
Did the same w/ TWM. Good luck.
Here's a thought...with these swap lines the USG would appear to be gaining quite a bit of leverage(no pun intended) versus the countries we're providing these lines to. The next administration could be in a position to extract quid pro quo in negotiations over the shape of whatever new international financial system emerges. Granted, we have major issues but it's not the US taxpayer's fault that German banks levered themselves using AIG swaps instead of real equity.
Holy crapola DOW.
Hear that whistling sound growing louder?
The last minute sell off might take it negative
And we're red.
My goodness.
Who called negative for the day?
Marc Faber held back nothing.
Sees red.
I can haz more rate cutz?
These interventions, government price controls on debt, support for failed businesses, support for failed states and support for failed businesses are all coming at a dramatic future cost.
Someday, the future is going to be upon us. Can American really withstand raging inflation? How about double digit interest rates? How about capital controls?
Bureaucrats at Fed and Treasury can't seem to see past their noses.
How fun if it ends dead even.
was it nades yesterday that calle this madness...?
Our ADHD markets strike again!
wondering if the GDP got leaked... hence the leakage from the reflation effort
What do you do when you're ED is so bad, the blue pill no worky?
Party over.
Nades has visions--it might have been him.
holy crap - down ~1%?!? That's just wrong. I am not bragging here because it was more or less dumb luck but I bought into SDS around 15 minutes ago when the SP500 was up what 3% or so? How can anyone, ANYONE think things are ok, be it CBC or not. It's just wrong, dudes (and dudettes). Just wrong.
No O for Maria today:(
I thought a 2% up move in 2 minutes was something, until I saw a 5% down move in 5 minutes.
Looks like Mad Max is carving his initials into the Dow chart or something. Kinda scary.
~450 point reversal from 3:48 to 4:00.
Holy. Cow.
Down 450 Dow points in 15 minutes? What happened?
How can SDS be down 5% when the S&P is down 1.27%
Well, the GDP might have been leaked, and it might be sort of on the slight negative side, but just be patient and wait. The q4 gdp is going to be something that rivaled the 82 recession saar drops.
Maria just pooped her pants.
All the gamblers reached for their chips before the croupier could beat them to the punch
Conversation aboard a Delta flight yesterday into OC.
Woman: "I'm getting freaked out about the economy. This looks major."
Man a few seats over, NOT with woman: "For pete's sake, this is just a market cycle. People like you are making it worse than it is."
...5 minutes later, a half-dozen or so people are agreeing with the man and the woman is convinced that she was mislead by 'fear mongering.'
All the normal cliches were deployed.
How can SDS be down 5% when the S&P is down 1.27%
Most sites have AMEX prices delayed 20 minutes. God help anyone in this market with that kind of delay.
Reit-DOA
A thread theme for Goldilocks:
YouTube -
Dear Fed,
send me all your gold. You don't need it. You can create money.
Thanks in advance
All the gamblers reached for their chips before the croupier could beat them to the punch
Exactly.
the future will be upon us
The future is already upon us. Feds beating it off as best they can but reverse leverage penalties are already in play.
@ "How can SDS be down 5% when the S&P is down 1.27%"
Market moving faster than its available liquidity.
Maybe those hedgies need to upgrade from millisecond trading speeds to nanoseconds?
Please tell me if I understand this correctly, as I may be mistaken. The Fed is creating arrangements with -by now- just about all central banks in the world. The gist of those agreemenents is: please buy dollars when we tell you to do so, and we will reimburse you, with dollard. (At least, that what I would think, since the only currency the US can print is the dollar.) What are all those other central banks going to do with those dollars when the dollar finally will drop?
Mr. Beach writes:
I feel like a complete moron for saving and spending within my means all these years.
And I feel a little less of a moron for not saving enough in the past 30 years. But a bout of 1,000 percent a month inflation will make either of our saving quite moot anyway.
Is it true that with the new swap arrangements, the dollar will be stronger? It seems any excess liquidity is sapped from the market, and offered to the banks, now through swaps with korea, mexico and others. This should be bullish for the dollar...no?
With this current event. Most probably hyperinflation will most likely occur. There will be to many U.S dollars in the market.
How will the swap lines w/South Korea,
Brazil, Mexico, and Singapore affect EEV?
I'd put all my money in CR TantaBank with no hesitation.