Bank of Canada is taking action on short-term lending:
14 Oct 2008 12:22 EDT DJ Bank Of Canada Injects C$495M Into Overnight Mkt TueOTTAWA (Dow Jones)--The Bank of Canada injected C$495 million (US$419.2 million) into the overnight market Tuesday to keep the overnight rate around the 2.50% target.
The Bank has injected additional liquidity into the overnight market every business day since Oct. 2.
The overnight market is one of the shortest lending markets around - as its name implies, it extends until the next business day. Rates in the overnight market are often used as a signal for official monetary policy rates.
The more this goes on, the more ridiculous anyone drawing a parallel between today and the 1930's looks. Back then, there was none of this kind of co-ordinated action to stabilize lending, markets, and ultimately international trade.
Posted by guest , Oct 14, 2008 12:37PM
Glad to see we have Bloomberg "idiot clauses" in our DB posts now
Posted by Daniel Harrison , Oct 14, 2008 12:40PM
@1 I see what you mean by that. I figured it was worth explaining, but if it irritates everyone I won't include them.
Posted by StupidEquityGuy , Oct 14, 2008 12:44PM
Daniel, while a few of us here are stupid, I don't think very many of us are idiots...
You are showing good early work, don't sweat our comments to much. This little club is not exactly easy on anyone... even the old timers...
~SEG
Posted by whatelseisgoingon , Oct 14, 2008 12:45PM
Injecting Liquidity sounds dirty to me
Posted by guest , Oct 14, 2008 12:45PM
can you extrapolate what than means in terms of poutine and time hortons's consumption per capita please? tia
Posted by guest , Oct 14, 2008 12:47PM
Hot liquidity injectiion?
Posted by guest , Oct 14, 2008 12:49PM
I find it fascinating that Old Ben is an expert on the great depression.
Posted by guest , Oct 14, 2008 12:49PM
make it a double/double injection
Posted by guest , Oct 14, 2008 12:49PM
No.. printing money will give us something different than the 30's for sure...
Posted by guest , Oct 14, 2008 12:54PM
idiot clauses? We are the smartest guys in the room.
Posted by guest , Oct 14, 2008 12:59PM
SEG - how quickly do you think we retest fridays lows?
Posted by guest , Oct 14, 2008 1:09PM
@4 First, tapping the lending facility. Next,...injecting capital.
Posted by guest , Oct 14, 2008 1:09PM
@4 First, tapping the lending facility. Next,...injecting capital.
Posted by guest , Oct 14, 2008 1:09PM
@11
Nov 5, 2008
- SEG's mother
Posted by guest , Oct 14, 2008 1:09PM
"we will not stand down" in Ben's article. Is he referring to himself?
http://marketwarnings.blogspot.com/2008/10/bernanke-and-fed-goals-before-they.html
Posted by Anal_yst , Oct 14, 2008 1:13PM
@ Daniel
Fo' serious, don't sweat the inevitable crucifixion, its as the name implies, inevitable.
Generally, the so-called "idiot clauses" ala bbg, wsj, etc aren't necessary here(unless its for comic relief), but don't worry too much about it
Posted by guest , Oct 14, 2008 1:27PM
Back then we didn't have the derivatives we have today. Back then we didn't have a gigantic bubble in real estate that was popping. Back then we didn't have a $10 trillion debt.
It's cool if you don't believe we are facing a depression, but injecting your posts with "see I told you so" every day is getting a little annoying. And it's a little uneducated as to the greater problems we are facing.
Posted by guest , Oct 14, 2008 1:31PM
Deja vu — Judith Apter Klinghoffer
Judith Apter Klinghoffer
US TAXPAYERS TO BAIL OUT CHINESE SWF?
It may be hard to believe but the WSJ reports that Chinese sovereign wealth fund - China Investment Corp., "has applied to participate in the U.S. Treasury's temporary guarantee program for money-market funds." This at a time when Bloomberg reports that "China's foreign-exchange reserves rose to a world record $1.906 trillion, helping to strengthen the nation's finances as the credit crisis threatens to trigger a global economic slump."
If anyone sane is still minding the store at treasury, they will decline the application. It should not be the business of the American taxpayers to save private individuals from their investment mistakes. It is certainly not the business of the American taxpayers to save foreign states from their investment mistakes. Nor is impossible to exaggerate the damage such a precedent would set.
Being politically manipulated, sovereign Wealth Funds present an imminent danger to America's independence. Hence, nothing will serve the US long term interest better than proof of their inefficacy. How important are they?"
http://tinyurl.com/3qfdvt
Posted by guest , Oct 14, 2008 1:34PM
Who is Daniel Harrison and why does he keep writing things on my computer screen?
Posted by guest , Oct 14, 2008 1:34PM
Who is Daniel Harrison and why does he keep writing things on my computer screen?
Posted by guest , Oct 14, 2008 1:40PM
@ 17 back then we didn't have Mcdonalds -just saying.
Posted by guest , Oct 14, 2008 1:42PM
Daniel:
Please keep including the "idiot clauses". A lot of readers/posters here are extremely well-informed in their own narrow specialty area of finance, but only have a very foggy understanding of other areas. I know plenty about hedge funds (especially the sort that are NOT in any significant trouble now) because I lend to them. As for where the funds to lend come from, that's not my problem, and so I know next to nothing about the funding markets. Even now, though my ilk is aware that funds are pricier than usual and even flat-out unavailable to some institutions, and that lending rates have to have room for that built in, somebody else figures out what the premium is. I just get to explain to senior-but-clueless-and-very-nervous-right-now Credit Risk execs why Client X is still credit-worthy even though it's a "hedge fund", break the rate news to the client, and amend the loan docs. Some poor schmuck in Treasury has to figure out how to scrounge up $100 million on 1.5 days' notice when the client sends in a drawdown notice. And if I asked any of those poor schmucks to explain the process and related monetary policy factors to me, they'd spew a couple of well-deserved expletives at me and hang up.
Posted by guest , Oct 14, 2008 1:43PM
@11, I don't know where "mom" gets her date, but its close enough. We have the WaMu CDS party coming up, plus additional types of liquidity adventures coming up. Once this weeks options expire is over, we will have another month to scream back and forth. Who ever has been short Vol in the last few weeks have to be bleeding from multiple orifices...
I am patiently waiting for the VIX to drop back down this week, before putting on my puts again.
~SEG
Posted by guest , Oct 14, 2008 1:49PM
@18 - yea we can decline to "bailout" CIC, but what if China and Japan declined to bail out our national debt in general? Genius.
Posted by guest , Oct 14, 2008 2:01PM
I like the Bloomberg/moron clause because not everyone is an expert on all things financial (like Bess and CDS) and if you can summarize it correctly correctly, great. Now if I could get more detail when a hedge fund is posted life would be perfect (AUM, manager).
confused portfolio manager
Posted by guest , Oct 14, 2008 2:05PM
@25- "like Bess and CDS." you're a jack ass.
Posted by guest , Oct 14, 2008 2:07PM
#24. True, but over here:
"Chinese sovereign wealth fund wants a bite of Crap Sandwich 2.0
By Michelle Malkin • October 14, 2008 01:16 PM"
http://tinyurl.com/3hrjjw
they may not understand how "things" work so they are kind of upset and it is there very same card and letter and email and fax writers that prevented the bill from going through sooner.
See, if there is no conversation and no explanation, "the little people" not knowing what is going on and why certain things are done the way they are, tend to go off the deep end with the cards and letters and emails and faxes.
Posted by Bulging Bracket , Oct 14, 2008 5:00PM
Love the shot from 9 about how similar this is - ze problem in the English speaking countries was massive deflation. Weimar Germany had a Zim style inflation problem, but not US, UK, Canada... So, actually, printing money IS likely to give us a different result from the 30s. Learn your economic history before spouting off.
Similarly, there WAS a real estate bubble in the 20s (I mentioned horrible deflation right?).
Daniel - definitely lose the idiot sections. Those who don't know will either keep up or leave. With the recent traffic surge and too many commenters migrating from Yahoo, being user unfriendly would be useful. There are enough assholes amongst the informed regulars!
Posted by guest , Oct 15, 2008 5:28PM
The post could use some additional info, it is an important sidebar to what gets discussed -mainly firm specific finance- and overnight lending stability will go a long way towards building lending flows between banks; doesn't seem like much in US dollar terms but the BoC has been assisting with liquidity since earlier this month.
Posted by guest , Oct 15, 2008 11:01PM
This is just another example of how slipshod and improvised the whole mmkt guarantee program is. They announced it 9/19, and it took a week to even get FAQs posted to Treasury's Web site.
It would be a mistake to treat China Investment Corp differently in something that's supposed to be a blanket guarantee. We already hosed China by refusing to let them bid on Unocal in 2005. We wouldn't let an ally like Dubai bid on our ports in 2006, even though a Saudi company already runs dozens. Now we're going to begrudge them a guarantee we're extending to other investors that's actually pretty low-risk? Crazy, partisan and possibly harmful given the amount of yuan-dollar recycling we need to keep both economies going.