[Eli]

Sounds good, have a nice weekend.

I don't think you are ridiculous but the statement just seemed completely inaccurate. To be clear I wasn't trying to attack you in an ad hominem way but your statement seems grossly inaccurate.

I have worked it out. The fact that Central Banks around the globe are having to inject hundreds of billions of dollars into the financial system is not a sign of a smoothly running global economic market. It is not a non event, it is a clear sign that something is horribly wrong.

[seldom_seen]

$this->bbcode_second_pass_quote('Eli', 'T')he fact that Central Banks around the globe are having to inject hundreds of billions of dollars into the financial system is not a sign of a smoothly running global economic market. It is not a non event, it is a clear sign that something is horribly wrong.

[Eli]

Abso-friggin-lootly

There is no transparency and these guys are out and out lying about how bad this is.

Lend is in trouble, country wide is in trouble and their only hope that Freddie and Fannie would come riding in to save the day was taken out and shot by Ofheo after the markets closed.

[Roccland]

"Sorry Temporarily Out of Service"

[mmasters]

xxxx

[MrBill]

Eli, I was not refering to you sorry. Others, yes. I do not want to respond today because, of course, I need time to consider everthing, and I do that best when I am in the office and not at home.

What I meant is that 25 basis points in comparison with many previous crises, where I have made markets in, is a blip on the screen. I have seen concerted central bank intervention before.

I have also seen capital controls imposed, overnight rates hiked to 100 percent p.a. , and a blip in overnight funds of 25 bps does not disconcert me. I bought Ukraine tbills at 2000 percent p.a.

I immediately qualified that opinion by saying, this does not mean that future developments would not be more serious.

Also, that injection of liquidity is not permanent. It is literally for over night funds up to one week. Then it will be gone. It is a bridge to the money markets.

Unlike Gideon or mmasters I have traded interbank FX and lived through many financial crises. If you think this is a crisis, you should have been trading ZAR in the 90s.

Any dimwit financial journalist that says, this is unprecedented, is an idiot. I have personally seen much worse. More on that next week. Cheers.

[DantesPeak]

Well, yes, currency crisies have been worse and bigger, and 9/11 was bigger - but not by much and the problem then was mostly physical.

However we don't know yet if this will turn into a credit/currency/banking crisis that might be like the worst of every previous crisis rolled into one super crisis.

[Eli]

Great answer Mr.Bill, if trading was my job I would not want to talk about it on the weekend either especially right now in this crazy market.

Well I guess the important distinction this time is that this is not just one CB having to take action we have so far seen Europe, Japan, Australia, Germany and the US having to take action.

And everything is still tied up in what future developments take place. But from what we have seen in this crisis is the usual mo by the people involved is to say everything is fine, fine, we are declaring BK.

I think the biggest piece of news that has happened since Friday was the Government telling everyone that Fannie and Freddie are not coming to the rescue. This was a major hope for everyone in housing. The other one everyone is hoping for is for the Fed to lower rates, that one to me makes no sense what so ever. Imports are already rising because of energy cost, lowering rates would kill the buying power of the dollar.

[mel1962]

I don't know what is going to happen next, but in few hours at 6 pm EDT, the New Zealand Stock Market Opens followed by the rest of Asia.

I would say by midnight tonight we will get a sense of direction. There is a lot of fear in the early newspapers out of Australia and New Zealand. Even the Chinese are in fear and have stated that the dollar is their reserve currency today!

[DantesPeak]

This FT article implies that the ECB will request help from the Fed. This would have the effect of reducing pressure on eurozone interest rates at the expense of increasing the US money base, that is this is another way besides Fed repos to increase the amount of money in the financial system.

$this->bbcode_second_pass_quote('', 'T')he Fed is likely to be sympathetic to an ECB request for a currency swap since it would be seen as a helpful way of dealing with pressure on the overnight federal funds rate caused by European banks’ thirst for dollars. It would be the first such arrangement between the world’s two biggest central banks since 2001.

Chris Furness, of 4Cast, the economic consultancy, said a swap would be “a market calming measure and would be logical in current situation”.

[manu]

The economic brains have had all weekend to put Humpty Dumpty back together again, let us see what they come up with. Who will be left holding the most paper in their game of musical chairs.

[MrBill]

Thanks for the link DantesPeak.

I must say, I find the logic baffling? This is first and foremost a US subprime fiasco where US banks are clearly at most risk. Why they would not lend to European banks is strange?

Many European banks have already declared healthy Q2'07 profits, and more have declared they have no exposure to US subprime markets.

The couple of minor names mentioned in the papers for bailouts were comparatively small like IKB. Germany alone has 1200 banks. Of which only a few are large like DB, HVB, Commerzbank and Dresdner.

One Landesbank has been mentioned as having liquidity problems, and I must admit, they along with the other Landesbanks do have a history of stepping into financial messes with great regularity. However, when I spoke to them this morning they indicated that last week they were punished like everyone else when Fed funds went to 6.25-6.50%, but slowly that situation is righting itself. They did not indicate that our own roll-overs would be affected, but naturally 6% for O/N funds is quite pricey compared to 5.36% last week.

I am a little confused about this FX swap between the Fed and the ECB. Basically, there are too many euros and not enough US dollars. So no one wants to lend dollars interbank.

So the ECB gives the Fed euros, and the Fed gives the ECB dollars (the term was not mentioned, so I do not know when the end date is), and then at maturity vice versa. As mentioned in the article this was supposed to ease lending pressures. But I cannot see how, unless European banks that need USD can borrow them from the ECB through an FX swap of their own?

As far as I know Italian banks deal with the Bank of Italy. German banks deal with the Bundesbank. France banks deal with the Bank of France, etc. I assume the ECB can carry out commercial operations with banks, but I do not know if this is how they are spreading USD liquidity in European markets or not? The article does not say.

UPDATE:
$this->bbcode_second_pass_quote('', 'T')his time, though, the ECB moved to inject unlimited liquidity only two days after the Fed retained its focus on inflation at its August policy meeting.

The stand-out nature of the ECB move was partly driven by the way it interacts with financial markets. Unlike the US Fed, it does not inject or withdraw liquidity every day, but instead conducts what it calls “fine-tuning” every now and then to regulate liquidity – and such actions were not scheduled for some time.

Many analysts applauded the ECB for its decisive action. Erik Nielsen, an economist at Goldman Sachs, said “This is outstanding central banking by the ECB and ought to provide a lot of comfort to the market.”

Bruce Kasman, an economist at JPMorgan, said the move sends two signals: first, that the ECB is “ready to provide liquidity to ensure the smooth operation of European money markets” and second, that for now it is happy doing so at its current interest rate.

However, some central bank officials fretted that the ECB move could cause market participants to worry more than they needed to.

“The aggregate liquidity conditions are usual even if there is a bit of turbulence. But there is the risk that banks may not really have needed this amount of liquidity and that the market therefore reads something into this action that they shouldn’t do,” says one ECB official.

[Iaato]

These are from first quarter 06, so things are even worse than these graphs represent. This is just the skin that the American banks have in the game. Foreign banks were apparently sold some of the more toxic toxic waste. I saw some graphs that said that 37% of the toxic mortgage garbage went to foreign banks. And foreign banks may be more transparent and be 'fessing up sooner.

Given the fact that this mess is going to continue to default as ongoing mortgage resets/foreclosures/bankruptcies destabilize the entire system, I do not understand how Mr. Bill can say that

"If you think this is a crisis, you should have been trading ZAR in the 90s. Any dimwit financial journalist that says, this is unprecedented, is an idiot. I have personally seen much worse."

I know you were referring to the innoculations of cash when you said the word unprecedented rather than the overall crisis, but to minimize this crisis is a mistake. As other posters have been pointing out in another thread on this forum about how it's different this time from the 1970s, I will add that this is a global reaction to global credit inflation and ultimately to global peak oil. I think people react to Mr. Bill so negatively because he makes statements that reflect smaller scale system concerns which are totally overwhelmed and negated by what is happening in the larger global system.

All of these money games are just pushing on a string, and adding more money to the system just adds to the steam bank of entropy getting ready to rise like summer heat into a major category 5 hurricane. Because of peak oil, which is the underlying trigger for all of this, nothing we do is going to fix the system structured as it is. You can say buh-bye to capitalism.

[Smudger]

Isnt Mr Bill simply saying that the events of last week were not the worst he has seen? nothing more than that.

[Eli]

Not really, he did say he was not that worried by what had happened and thought it was no big deal, yet.

He then went on to give a very good explanation of why he felt that way and made some very good points to clarify his point.

And then after reading the FT article he modified his position further and said he may have been "too sanguine" in his first post.

And the situation right now is so fluid no one really has a good idea what happens next. Right now CBs around the world are keeping Humpty Dumpty propped up on the wall but we are still just one bad ticker away from a huge sell off though.

[Eli]

No, I will let him off the hook it is the internet after all, there is no point in trying to win it.

He went on to explain himself quite well and gave a reasonable answer, I didn't agree with it but it was a good explanation of what he was thinking.

That alone is enough.

And now he is further changing his mind after getting back to work and looking at more info. I have progressively changed my mind about things like this before myself. He does not need to give a big Mea Culpa.

[dorlomin]

Daft question but will injecting a couple of hundred million dollars into the market not cause inflation? I know its small beer on the volumes traded daily but its still new money....

[mgibbons19]

$this->bbcode_second_pass_quote('MrBill', 'S')orry to disappoint, but awefully tiring to be attacked everytime I bother to post, so work it out yourselves! It is my weekend. My portfolio is hedged. Cheers.