In a concerted move to stave off yet more credit supply problems the central banks of Canada, England, Japan, Europe and Switzerland as well as the US Federal Reserve got together to lend money to some European banks that could find no other avenue of borrowing.
After years of central bank action around the world and tinkering with the figures we’re back where it ended in about August 2007.
This just shows that all that really happened was that we managed to stave off the effects for a while with bail-outs and QE, but the real problems were never really addressed.
“Clearly there is a very serious situation in the financial markets at this time.” Said a spokesman for the UK prime minister “We are experiencing a credit crunch and that central bank action is about trying to mitigate the effects of that credit crunch. They are ensuring they have the capacity to take action.”
A Bank of England statement said:
“The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.”
The markets as they do reacted swiftly and gained, the FTSE for example trotted up a 3.2% rise. With that sort of reaction you would think that all the economic problems had now been solved. Well, they have but maybe only for a few weeks.
And at the centre of the storm, to make matters worse European finance ministers have admitted that they have been unable to raise the funds required to keep the single currency afloat prompting the European Commission vice president, Olli Rehn, to say “We are now entering the critical period of 10 days to complete and conclude the crisis response of the EU.” The EU president, Herman Van Rumpoy said that “The trouble has become systemic. We are witnessing a full-blown confidence crisis.”
Many believe that saving the Eurozone and its banks is the key to the prevention of further economic problems. But is saving the euro now a realistic scenario?
It may now just be about the timing of its collapse and the big boys setting the scene to ensure that they are as protected as possible when it happens. After all, hasn’t the UK’s own FSA already told the banks to prepare for a Euro collapse?