Thursday, 09 October 2008 06:00

A real life, real time example of the Great Global Macro Experiment

In The Great Global Macro Experiment, Revisited,
I lamented on the slashing of rates to save us from recession that brought upon a risky asset binge, that brought upon a central banker's loss of control of interest rates, that brought upon a recession and risky asset bust, that brought upon a global interest rate reduction (South Korea, Taiwan, Hong Kong Cut Interest Rates After Fed, ECB, BOE Move) that ... Yen Falls as Global Interest Rate Cuts Boost Stocks, Revive Risk Appetite. If you read "The Great Global Macro Experiment, Revisited" you know that I rely on these central banker's extreme, and unfortunately globally destructive, overreaching to put food on the table. Well, I think the kids are going to eat well this year... BoomBustBloggin' forever more!

From Bloomberg:
South Korea, Taiwan, Hong Kong Cut Rates, Join Global Push to Stem Crisis but.... Asian Money Market Rates Rise as Banks Ignore Coordinated Move

Asian money market rates rose as banks remained reluctant to lend even after South Korea, Taiwan, Hong Kong and China lowered borrowing costs, while Japan and Australia pumped more than $42 billion into the financial system.

Hong Kong's three-month interbank offered rate jumped 25 basis points to 4.4 percent, a one-year high. Singapore's similar rate for dollar loans rose 19 basis points to 4.51 percent, the highest since Jan. 8. The interbank offered rate in Tokyo was fixed at 0.871 percent, the highest since Dec. 26.

``Interest-rate cuts will be of little help in the near term because the issue is trust, not rates,'' said Cezar Bayonito, a liquidity trader at Allied Banking Corp. in Makati, Philippines. ``The liquidity squeeze is still out there.''

Overnight dollar borrowing costs in London soared for a third day yesterday before the Federal Reserve, the European Central Bank, Bank of England, Bank of Canada and Sweden's Riksbank each reduced their benchmark rates half a percentage point in an unprecedented coordinated move. The Bank of Japan, which didn't participate, said it supported the action.

It doesn't matter, though - Equity markets have traders that act dumb... Asian Stocks Gain, Snapping Five-Day Slump After Global Interest-Rate Cuts

After all, it's not like there are global issues to worry about... Kaupthing, Iceland's Biggest Bank, Seized by Nation's Financial Regulator

Iceland's Financial Supervisory Authority will take control of Kaupthing Bank hf, the nation's biggest bank and the third lender to be seized by the government since the financial crisis escalated.

Kaupthing's domestic deposits are fully guaranteed, and the aim of the takeover is to provide a ``functioning domestic banking system,'' the FSA said in a statement on its Web site today.

Iceland's banking system has buckled under the weight of debts equal to 12 times the size of the economy, with financial regulators already in charge of the second and third largest lenders, Glitnir Bank hf and Landsbanki Islands hf. Prime Minster Geir Haarde indicated yesterday he may be forced to seek aid from the International Monetary Fund after failing to secure loans from European governments and central banks.

The central bank yesterday abandoned an attempt to fix the exchange rate, indicating it is powerless to halt the slump in the krona. Iceland will start talks with Russia on Tuesday to secure a loan of as much as 4 billion euros ($5.46 billion), Haarde said yesterday.

Iceland's oversized bank industry put it ``probably in the worst position in the developed world to cope with the ongoing credit crisis,'' Deutsche Bank AB economist Henrik Gullberg said on Oct. 7.

But wait, there's more in the news today:

Libor Holds Central Banks Hostage as London Rate Freezes Worldwide Lending

Fear Trumps Greed as Market Worries Amplify News, Paralyze World Economy

Stocks, U.S. Futures Rise as IBM Confirms Forecast; Cap Gemini, Dexia Gain

U.K. May Own as Much as 30% of Four Biggest Banks, Bernstein Analysts Say
Paulson Signals U.S. May Invest in Lenders as Part of $700 Billion Rescue

Iceland's Krona Currency Trading Grinds to a Halt as Kaupthing Taken Over

Bernanke, Paulson Seek Global Help as Credit Crisis Defeats U.S. Efforts

AIG May Tap $37.8 Billion from Federal Reserve, Following $85 Billion Loan

House Prices in U.K. Fall Most in 25 Years as Banks Cut Lending, HBOS Says

I got kids to feed...


Last modified on Thursday, 09 October 2008 06:00