Friday, 26 September 2008

Is anyone keeping count.....

Here is a snippet from a Bank of England press release, which was issued earlier today:

"Central banks have been employing co-ordinated measures designed to address the pressures in global money markets. Most recently, central banks have acted together to inject dollars into the overnight markets. Using reciprocal currency arrangements (swap lines) with the Federal Reserve, the Bank of England, the European Central Bank (ECB), and the Swiss National Bank today are announcing the introduction of operations to provide U.S. dollar liquidity with a one-week maturity. These operations are intended to address funding pressures over quarter end. Central banks continue to work together closely and are prepared to take further steps as needed to address the ongoing pressures in funding markets."

Over the last few months, I have seen a lot of these types of press releases. Invariably, they contain lots of phrases like "coordinated measures" and "pressures in the global market". Somewhere, buried deep in the text, is a number. It is always in the billions.

Is anyone keeping count on these liquidity operations? The numbers are getting a little silly. More worryingly, these initiatives to provide emergency help to banks never seem to work.

3 comments:

aSteve said...

These "liquidity injections" are interesting... but there is a complication keeping tally... the injections are just loans... likely with short terms... so the cumulative tally is likely far lower than one might guess.

It would make for a great graph...

mike said...

What I worry about is that the liquidity might not be purely helping UK based companies. How do we know the money is not being sent across to the US on a Friday night transfer!

There should be more transparency on how the money is being used and what assets are being used to secure the loans.

MAB said...

Alice,

A short time age, the U.S. fed had an $800 billion balance sheet comprised primarily of treasuries.

Today, the fed's balance sheet is a disaster with > 70% of the treasuries swapped out at negative real interest rates for dodgy assets.

The U.S. is becoming a banana republic. That said, I'm not sure the rest of the developed world is any better off.