ECB Offers Unlimited Cash as Bank Lending Costs Soar

[Sapiens]

http://www.bloomberg.com/apps/news?p...MPE&refer=home

The ECB said today it provided the largest amount ever in a single so-called ``fine-tuning'' operation, exceeding the 69.3 billion euros provided on Sept. 12, 2001, the day after the terror attacks on New York.

Wow! Looks like we are in for a wild ride today.

[FRED]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

http://www.bloomberg.com/apps/news?p...MPE&refer=home

Wow! Looks like we are in for a wild ride today.

Discount window opens... without Jim Cramer.

[zoog]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

Discount window opens... without Jim Cramer.

The U.S. Federal Reserve added $12 billion in temporary reserves to the banking system today when it arranged 14-day repurchase agreements, or repos, about the amount analysts predicted. Just two days ago, the Fed said "tighter" credit conditions aren't a threat to economic growth.

As usual, follow what they do, not what they say. Also not buying the word "temporary".

[Tet]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

As usual, follow what they do, not what they say. Also not buying the word "temporary".

$12 billion is a pretty common day for the Fed machine, it's the $40 billion day's you have to look out for and I guarantee you that money always finds it's way eventually into the market. I try my best not to bet against these guys.

[Tet]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

$12 billion is a pretty common day for the Fed machine, it's the $40 billion day's you have to look out for and I guarantee you that money always finds it's way eventually into the market. I try my best not to bet against these guys.

My bankster just sent me an e-mail that it's $24 billion the Fed is tapping into and Canada is adding liquidity as well. Once created this liquidity needs to go somewhere, where's it going to flow? Stocks, Bonds or Real Estate.

[johngaltfla]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

Follow the money. IMHO, we are looking at the start, nothing close to just how bad it is going to get. The Euros have a more messed up housing fiasco in some markets than we do.

[blazespinnaker]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

My bankster just sent me an e-mail that it's $24 billion the Fed is tapping into and Canada is adding liquidity as well. Once created this liquidity needs to go somewhere, where's it going to flow? Stocks, Bonds or Real Estate.

I don't think so. It'll flow into some corner of the market which will blow up into a bubble like real estate did. These liquidity infusions just create instability, they don't solve anything.

[Tet]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

I don't think so. It'll flow into some corner of the market which will blow up into a bubble like real estate did. These liquidity infusions just create instability, they don't solve anything.

Time out, I'm not saying this is a good thing, I'm simply pointing out that the ECB, the Fed and Canada's Central Bank have a limited number of options to spent this liquidity on, stocks, bonds & real estate. This liquidity is not going to be used to create roads, electricity, provide health insurance or do anything beneficial at all, it will be used to further line somebodies pockets, period.

Heading into the Y2K scam and I would hope by now there is agreement that this was indeed a scam the Fed created over $40 billion of liquidity and explained this as concerns over Y2K potential problems. On January 3rd the NASDAQ opened at 4186 and immediately plunged to 3711 for a 11% haircut before rocketing to 5132 on March 10th for a 38% moonshot.

10-year treasuries in 2000 stayed flat, so the liquidity ended up almost entirely in the market. I would expect something similar, with a similar outcome, it wouldn't shock me if I'm bearish come this October.

[Andreuccio]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

Tet, if you expect a similar result, a plunge followed by a steep rise, why are you bearish? Are you hoping to time the drop and then the rise, or am I misunderstanding something.

[Finster]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

I don't think so. It'll flow into some corner of the market which will blow up into a bubble like real estate did. These liquidity infusions just create instability, they don't solve anything.

Bull's eye, Blaze. What we are seeing now is the result of the last great liquidity infusion ... the one the Greenspan Fed carried out in 2002-2006 in an attempt to rescue the stock market. That led to massive excesses in the housing and credit markets, which led to ... well ... the mess that is unravelling now.

Put succinctly, liquidity infusions just create instability. (... hmmm ... now where did we hear that before ...;-)

[Finster]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

http://www.bloomberg.com/apps/news?p...MPE&refer=home




Wow! Looks like we are in for a wild ride today.

This is big, folks. At least a 7.8 on the Richter Scale. When the CBs start to panic, maybe the rest of us ought to consider following suit ...

[Tet]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

Tet, if you expect a similar result, a plunge followed by a steep rise, why are you bearish? Are you hoping to time the drop and then the rise, or am I misunderstanding something.

Sorry, I'm not Bearish, actually pretty bullish right now short term, I said in October I might become Bearish. Hell October is lightyears away. Or maybe I'm just not a very longterm trader.

[Stretch002]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

Can someone explain to me what this infusion of cash indicates? Has credit contracted so much that they needed to inject some cash into the system to help the banks meet redemptions? Is this because they see some impending deflation and want to fight it before anything happens? Are they simply trying to help prop up their respective stock markets? What do you all think the significance of this event is?

[Sapiens]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

Can someone explain to me what this infusion of cash indicates? Has credit contracted so much that they needed to inject some cash into the system to help the banks meet redemptions? Is this because they see some impending deflation and want to fight it before anything happens? Are they simply trying to help prop up their respective stock markets? What do you all think the significance of this event is?

Is simple terms, the EU banks are broke, there was a run on them. Now, for a more clear explanation see Mish's blog and all the links he recommends:

Sudden Demand For Cash
http://globaleconomicanalysis.blogsp...-for-cash.html

[Stretch002]

Re: ECB Offers Unlimited Cash as Bank Lending Costs Soar

Thank you for the link Sapiens. I have now bookmarked that site.

A very interesting situation. To my barely educated financial brain, it would appear to indicate an upcoming deflationary period. Is the EU and FED trying to prevent that from happening by simply printing more money and opening up the credit lines?

My thinking is that if there is indeed a cash crunch, it stands to reason that banks and various funds will be liquidating assets which can be empirically valued. If that that is the case I would expect to see commodity prices decrease. Things like PM and energy should be going down right? If the bankers wanted to prevent this, is the way simply to open up the credit lines and hand everyone some cash at a low rate thereby keeping the money supply from contracting and thus deflating?

If I am correct, and it doesn't work, are we in for a massive bout of deflation?